Volatility Shares Seeks to Issue First Ether Futures ETF

Issuer may face challenges due to ether’s murky classification status.

LucyBrewster310x310
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Finance Reporter
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Reviewed by: Lisa Barr
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Edited by: Ron Day

Volatility Shares, which last month launched the first leveraged bitcoin futures ETF, is seeking to issue the first exchange-traded fund that focuses on ether, the second-largest cryptocurrency.  

The firm outlined its plan for an ETF that tracks ethers futures in a July 28 filing with the Securities and Exchange Commission. Like bitcoin futures funds such as the Hashdex Bitcoin Futures ETF (DEFI), the proposed ETF would give investors exposure to digital assets through tracking the cryptocurrency’s futures contracts. 

Volatility Shares, which manages $173.6 million in four ETFs, filed to launch the ether fund as companies including BlackRock Inc. and Fidelity Investments seek permission to launch much-hyped spot bitcoin ETFs.  

While the SEC has allowed bitcoin futures ETFs, the regulatory body has not approved any ETF applications that track ether futures contracts, which started trading in January 2021. Ether, the currency that operates on the ethereum blockchain platform, is treated as a commodity and not a security, according to CoinDesk

“The most likely reason an ether futures ETF hasn't been approved is because there is ambiguity with regard to whether ether is a security,” etf.com analyst Sumit Roy said.  

First Ether Futures ETF  

Other asset managers, including Grayscale Investments and Bitwise Asset Management, filed for an ether ETF with the SEC in May before withdrawing after discussions with the agency. The SEC reportedly told the ETF issuers to withdraw, Blockworks reported this week. 

Last month, the company, based in Mt. Kisco, New York, launched the 2x Volatility Shares 2x Bitcoin Strategy ETF (BITX), the first leveraged bitcoin futures ETF. It has $24.1 million in assets and has dropped 14% since it began trading. 

SEC Chairman Gary Gensler has expressed concerns about crypto products meeting the agency’s fraud protections standards and Volatility Shares acknowledged those concerns in its filing. "The market for Ether Futures Contracts may be less developed, less liquid and more volatile than more established futures markets,” the company wrote.  

According to the filing, Penserra Capital Management is listed as the fund’s investment sub-advisor. The fund’s fees management fees would be 1.15%.  

Roy explained that one path is for cryptocurrencies such as ether to be classified as another nonsecurities asset such as a commodity, which would allow crypto assets to go from securities to nonsecurities if the blockchains are decentralized.  

“Until that path is in place, I don't think the SEC will willingly allow an ether ETF to trade. And therefore, we are unlikely to see an ether futures ETF either,” he said.  

 

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.