IIRC nostr:nprofile1qy2hwumn8ghj7un9d3shjtnyv9kh2uewd9hj7qg3waehxw309ahx7um5wgh8w6twv5hszrnhwden5te0dehhxtnvdakz7qgkwaehxw309ajkgetw9ehx7um5wghxcctwvshsqgysty8dcfrmzq8j8pu6gy4kv9kxt6r543usvy9pte4ny4ap3kdwgvgwfahg said a few months ago that in-kind was not necessarily off the table for the future, it was more a particular set of circumstances around getting listed that led all the ETF providers choosing cash redemption.

Basically after IBIT got approved it was a race to also get approved, as not being live on the go date would lead you to lose market share. And IBIT had cash redemption, so as to minimize differences to the already approved fund everyone went cash redemption. This all to avoid any delay or complication in getting approved by the X date.

So it's not that it's banned by the SEC, or the funds don't want to offer it, it's more that they went live on cash redemption only basis to get approved faster.