SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?
SEC policy on crypto ETFs is “completely incoherent,” VanEck’s head of digital assets research tells Blockworks
ymcgraphic/Shutterstock modified by Blockworks
Fund groups are pursuing an ETF that would hold ether futures contracts after efforts to do so earlier this year came to a halt. This may signal that the US Securities and Exchange Commission has had a change of heart, and is now willing to at least consider a potential approval.
Volatility Shares filed for such a product on Friday, and now others — Grayscale Investments, Bitwise, Roundhill Investments, ProShares and VanEck — have followed suit this week.
According to two sources who are directly familiar with the latest ether futures ETF filings, the SEC has indicated its readiness to publicly consider such a product. However, the regulator’s willingness to weigh in on ether futures ETFs does not guarantee their approval, one of the sources added.
“From a product perspective, all the ETF issuers are probably thinking it’s worth the cost of filing rather than risk falling behind in case ETH [ETFs] take off, even in futures form,” said Henry Jim, a Bloomberg Intelligence analyst who flagged the filings on Twitter.
The SEC’s willingness to consider these offerings is a reversal from May, when sources said the US securities regulator had told firms seeking ether futures ETFs to halt their efforts. The SEC did not return a request for comment at the time.
Grayscale, for example, sought to launch an ether futures ETF in May, but days later amended a filing indicating it was no longer looking to do so. Bitwise Asset Management, Direxion and Roundhill Investments — which had followed Grayscale’s lead in filing for ether futures funds — withdrew their applications shortly after.
The SEC’s decision to consider ether futures ETF in the past three months, following the pause in plans by various potential issuers, has left some industry watchers puzzled. The specific reasons behind the regulator’s move remain somewhat of a mystery.
“SEC policy on crypto ETFs has always been haphazard,” said Matthew Sigel, head of digital assets research at fund group VanEck. “Now it is completely incoherent.”
A spokesperson for the SEC did not immediately return a request for comment Wednesday.
Shifting winds in crypto ETF land?
Bradley Duke, chief strategy officer at ETC Group, said in a statement that there seems to be a growing acceptance at the SEC that crypto is “an inevitable part of America’s investment landscape.”
Nate Geraci, president of The ETF Store, noted that sentiment around crypto-related ETFs has indeed grown more positive in the last couple months.
He attributed that, in part, to BlackRock entering the spot bitcoin ETF race in June, as well as optimism around a favorable outcome in Grayscale’s lawsuit against the SEC.
Bloomberg Intelligence analysts James Seyffart and Eric Balchunas put the odds of a spot bitcoin ETF approval at 65%, according to a Wednesday tweet.
“Overall, the winds appear to be shifting in favor of crypto-related ETFs and issuers are now jockeying for position in an attempt to capitalize,” Geraci told Blockworks.
The SEC also allowed the first leveraged bitcoin futures ETF to come to market in June. The firm to launch that fund was Volatility Shares — the same company that kicked off this latest wave of ether futures ETF filings.
“Volatility Shares has obviously been in direct communication with the SEC recently and it seems reasonable to assume they saw or heard something to indicate an ether futures ETF might be possible,” Geraci said.
The company declined to comment on its ether futures ETF filing.
In October 2021, the SEC approved ETFs that hold bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME). The ProShares Bitcoin Strategy ETF (BITO) — the first fund to launch under this approval — is significantly ahead of its competitors in terms of assets under management, boasting approximately $1 billion.
“It seems illogical for the SEC to allow ETFs holding CME-traded bitcoin futures, but not ones owning CME-traded ether futures,” Geraci said. “Given the past history of these filings, it’s difficult to speculate on how the SEC will respond.”
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