After earlier attempts to create an ETF to hold futures contracts for ether came to a standstill, fund groups have now decided to pursue the creation of such a product. It may be a sign that the US Securities and Exchange Commission is willing to consider an approval at least.
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.
The SEC, according to two people who have been directly involved in the recent ETF filings for ether futures, has shown its willingness to publically consider this product. One source added that the SEC’s willingness is not a guarantee of approval.
“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,” Henry Jim is a Bloomberg Intelligence Analyst who tweeted the documents.
Sources say that the SEC is now willing to take these offers into consideration. In May, it had previously told US firms looking to launch ether ETFs they should stop their search. SEC didn’t respond to a comment request at that time.
Grayscale was planning to launch an ETF based on ether in May but amended its application a few days later to say it would no longer be interested. Bitwise Asset Management, Direxion and Roundhill Investments — which had followed Grayscale’s lead in filing for ether futures funds — withdrew their applications shortly after.
After a period of pause, some observers in the industry are confused by the SEC’s decision in recent months to examine ether futures ETF. It’s unclear what the SEC was thinking when it decided to consider ether futures ETF in the past three months, following a pause by various potential issuers.
“SEC policy on crypto ETFs has always been haphazard,” Matthew Sigel is the head of research for digital assets at VanEck. “Now it is completely incoherent.”
SEC’s spokesperson didn’t immediately respond to an inquiry for comment on Wednesday.
Crypto ETFs: shifting winds?
Bradley Duke, Chief Strategy Officer at ETC Group said that the SEC seems to have a growing understanding that cryptocurrency is a legitimate investment. “an inevitable part of America’s investment landscape.”
Nate Geraci of The ETF Store noted that the sentiment towards crypto-related ETFs had indeed improved in recent months.
This was partly due to BlackRock’s entry into the bitcoin spot ETF race back in June. He also attributed it to the optimism surrounding a positive outcome of Grayscale’s lawsuit against SEC.
Bloomberg Intelligence’s James Seyffart, and Eric Balchunas placed the odds at 65% that a bitcoin ETF would be approved. This was according to their tweet on Wednesday.
“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.
In June, the SEC allowed for the launch of the first leveraged Bitcoin futures ETF. 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 refused to comment about its ETF application for ether futures.
SEC has approved the ETFs which hold Bitcoin futures contracts that are traded on Chicago Mercantile Exchange. 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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