VanEck, 21Shares Ask SEC to Reinstate First-to-File Approval
- Firms say the agency has done a disservice by abandoning its “first to file” practice when approving ETFs.
- ETF issuers, including Canary Capital, say in a letter that as a result crypto launches unfairly favored big issuers.
- Hopeful Solana ETF issuers may be affected when funds launch, the letter states.
The Securities and Exchange Commision should return to a practice that has permitted smaller fund issuers to compete on a level playing field with the industry’s biggest firms, according to a letter VanEck and a pair of other ETF issuers sent to the agency.
The so-called "first-to-file" principal means that if a group of companies were aiming to issue an exchange-traded fund, they would be approved in the order in which the applications were received, according to the letter sent June 5 by VanEck, Canary Capital and 21Shares.
The SEC, which reviews ETF applications for approval or denial, has abandoned that approach recently, most notably with the approval of 11 spot Bitcoin and eight spot Ethereum funds last year, the letter stated. The agency is reviewing a handful of applications to issue ETFs that hold the Solana cryptocurrency.
Spot Bitcoin ETF applications piled up over the years at the SEC, with the first application from Cameron and Tyler Winklevoss in 2013. When approval came in January 2024, the SEC greenlighted 11 funds simultaneously, which all began trading the next day. Much the same thing happened with spot Ethereum ETFs last July.
IBIT, ETHA Success
In both cases, ETFs from BlackRock, the iShares Bitcoin Trust (IBIT) and the iShares Ethereum Trust (ETHA), took in billions and became the biggest among rivals. The letter states that applications being approved in order of when they are received gives smaller issuers a fighting chance against the multi-trillion dollar asset managers.
“It is really the only way that smaller issuers can compete against firms with bigger brands,” according to the letter. Addressed to SEC Chairman Paul Atkins, the letter said larger firms typically wait for smaller rivals to file before submitting their applications and gaining simultaneous approval.
The letter highlighted cases such as when ProShares issued its ProShares Bitcoin ETF (BITO) in 2021 three days ahead of a rival, permitting it to gain more than 90% market share.
BlackRock's iShares business is the world’s biggest ETF issuer. It holds nearly 30% of the entire U.S. industry’s assets, or $3.4 trillion in 468 funds. Vanguard, the No. 2 issuer, holds $3.2 trillion, meaning the top two companies control more than half of the $11.2 trillion U.S. industry.
VanEck is the 10th-largest, with $89 billion in assets. Neither 21Shares or Canary crack the list of top-25 issuers.
