SEC Likely to Approve Ether Futures ETF: Report

SEC Likely to Approve Ether Futures ETF: Report

As a race for market dominance looms, Valkyrie and Bitwise may be first in line.

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Finance Reporter
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Reviewed by: Lisa Barr
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Edited by: Sean Allocca

The SEC looks set to approve ether futures ETFs, as investors apply continued pressure on the agency to greenlight a new class of digital assets.  

Bitwise Asset Management and Valkyrie Investments are jockeying for pole position in the ether futures race, as the companies filed to convert current bitcoin futures exchange-traded funds. The goal is to create ETFs that track ether futures as well. Volatility Shares submitted the first fresh refiling on July 28. 

It remains unclear in what order the agency would approve the ether ETFs. 

Ether Futures ETFs on Fast Track? 

However, anonymous sources confirmed to Bloomberg that the agency is ready to approve ether futures ETFs, perhaps as soon as October. The funds would track the second largest cryptocurrency and stand apart from physically backed ether.  

The SEC reportedly requested firms withdraw their applications for ether-futures-tracking ETFs in May. But in the past month a dozen firms—including Volatility Shares, ProShares and Bitwise—have refiled with the SEC, and it remains unclear which filings the agency would approve, according to Bloomberg.  

Eager digital asset investors have pressed the Securities and Exchange Commission to approve cryptocurrency ETF products, the most high-profile a spot bitcoin ETF that tracks the coin’s price. The SEC currently allows exchange-traded funds that track bitcoin futures, but a slew of firms including BlackRock, ARK Investment Management and Bitwise Asset Management are all awaiting SEC approval to launch a spot bitcoin product. 

The agency has held off on deciding whether ether constitutes a security or some other asset or good, such as a commodity. A green light on a spot ether ETF could hinge on such a determination, according to etf.com Senior Analyst Sumit Roy.  

“If the rumors that the SEC is willing to allow ether futures ETFs to launch are true, then it might be because the SEC is ready to admit—either explicitly or implicitly—that ether is not a security,” said Roy. 

The price of ether dropped about 4% on Friday afternoon.  

“When it comes to ether, there’s always been an open question about whether the cryptocurrency is a security or not,” Roy added. “Unlike with bitcoin, the SEC hasn’t been clear about ether’s regulatory status.” 

Meanwhile, cryptocurrency firms are gearing up to differentiate themselves if the SEC gives the go-ahead. Bloomberg ETF analyst James Seyffart pointed to Roundhill Investments disclosing a management fee of 0.19% for its proposed ether futures ETF, which is far lower than the expense ratio of the Proshares Bitcoin Strategy ETF (BITO), which is 0.95%. The average expense ratio for U.S. cryptocurrency ETFs is 0.98%, according to etf.com data. 

Yet no one knows for certain what will occur regarding potential approval for ether futures ETFs. Bryan Armour, ETF analyst at Morningstar, said he “wouldn’t expect that much investor interest” in the product. Valkyrie Chief Investment Officer Steven McClurg told etf.com that he saw more investor demand for a combined ether-bitcoin futures product than a stand-alone ether futures product.  

“Either way, what happens with ether futures ETFs will reveal a lot about how the SEC views the world’s second most valuable cryptocurrency,” Roy said. 

The ether funds will likely be approved at once, the Wall Street Journal reported, citing sources familiar. Approving the funds at once would make the competition more of a horse race and remove so-called first mover advantage enjoyed when BITO, the first bitcoin ETF, was launched in 2021. 

Contact Lucy Brewster at [email protected] 

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.