November 11, 2025

Welcome to the Meridian Update. The government shutdown is not over, but the Senate officially passed its bill to reopen the government. The House is set to vote Wednesday. So still too early to say what will come from the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) after the break. In the meantime, let’s dive in.

However, the IRS is still working?

We made the point yesterday that the SEC’s and CFTC’s efforts to increase regulatory clarity for on-chain activities had slowed as a result of the government shutdown. But the Internal Revenue Service (IRS) is still publishing long documents?

“This revenue procedure describes a safe harbor for trusts that otherwise qualify as investment trusts under § 301.7701-4(c) and as grantor trusts to stake their digital assets without jeopardizing their tax status as investment trusts and grantor trusts for Federal income tax purposes. This revenue procedure also provides a limited time period for an existing trust to amend its governing instrument (trust agreement) to adopt the requirements of the safe harbor.”

The IRS published this long document yesterday. We are sure you want to read it in its entirety, so we’ll link it one more time. Nothing like a bit of IRS writing to wake you up on a Tuesday morning, huh?

All jokes aside, it’s actually a wonderfully written document that explains the concept of staking, and core elements of how proof-of-stake networks really work, quite well. For example:

“To incentivize multiple validator node operators to participate, and in exchange for providing validation and related activities, newly minted digital assets specified by the protocol and/or fees paid by parties seeking to add their transactions to the blockchain (collectively, “rewards”) are credited or transferred to validators. Rewards generally are received in the form of a blockchain’s native digital asset. Conversely, if a validator fails to act in accordance with a blockchain network’s consensus mechanism, some staked units may be forfeited as a penalty (slashing).”

Look, we know that’s a bit much for a Tuesday morning. We will come back to all these things in a less, uhh, IRS-y way soon. However, to the writer of this document at the IRS: the Meridian Update is prepared to make you a full-time employment offer. Only kind of a joke.

If your eyes haven’t glazed over yet, we’ll finally tell you why we are writing about this. We are writing about this because it is good news for many of the exchange-traded products (ETPs) we have written about recently. There was a question about whether managing staking behavior for, and as such delivering the rewards of staking to, these ETP holders would jeopardize the ETPs trust status, resulting in tax consequences.

The answer is no! So long as the ETP does a few things the IRS says it has to. Crypto Twitter noticed.

Time to CFTC what’s going on in regulatory (part n)

Again, the government remains shut down…but it already feels a little less shut down after the Sunday’s Senate activities. For example, some Senators released a discussion draft of legislation that would impact the CFTC’s regulatory purview when it comes to a huge number of on-chain assets:

“The discussion draft includes:

- A clear definition of digital commodities and the establishment of a spot market digital commodity regulatory regime with the CFTC;
- Robust consumer protections including customer fund segregation requirements, conflict of interest safeguards, appropriate customer disclosure requirements, and prohibitions on certain affiliated trading;
- A trading registration regime designed to facilitate liquid and resilient regulated markets while protecting retail participants;
- Requirements for the CFTC and SEC to coordinate and collaborate on necessary inter-agency rulemakings;
- Protections for self-custody and innovative technology; and
- A new funding stream for the CFTC to stand up a spot market regulatory regime.”

This is just draft legislation. Things get drafted then fade into memory on Capitol Hill all the time. But if 2025 has had one theme when it comes to legislation touching the on-chain world, it’s that it fades into memory a bit less often and turns into law a bit more often. 2025 has been a year of high US government attention to the on-chain world.

So it’s a bit early yet to do a deep dive on what this might mean for the on-chain world. But for now, there are a few things to note.

First, a couple years ago the question was an effort to have the SEC, not the CFTC, regulate many of the assets in question under this legislation. People in the on-chain world didn’t like that. Being a security has some downsides relative to being a commodity, or so people in the on-chain world say. That question seems like a distant memory.

Second, wow. The draft legislation keeps flowing, the regulatory guidance keeps rolling, and the public statements from important government officials keep making their way into the news. 2025 will probably go down as the year the on-chain world took over Washington, D.C. It’s sort of…surprising? Weird? Inspiring? Something to keep an eye on?

That’s a wrap

The government shutdown was not over, some tax uncertainty got resolved, and bipartisan draft legislation caught Crypto Twitter’s attention. We’ll see you tomorrow morning.

Think we missed something today? Send us a note: email@meridianupdate.com.