SEC Seeks Public Comment on Spot Ether Exchange Traded Fund (ETF) Applications | Practical Law

SEC Seeks Public Comment on Spot Ether Exchange Traded Fund (ETF) Applications | Practical Law

The SEC has issued notices seeking public comment on applications for three exchange traded funds (ETFs) to trade spot Ether.

SEC Seeks Public Comment on Spot Ether Exchange Traded Fund (ETF) Applications

Practical Law Legal Update w-042-9444 (Approx. 4 pages)

SEC Seeks Public Comment on Spot Ether Exchange Traded Fund (ETF) Applications

by Practical Law Finance
Published on 10 Apr 2024 • USA (National/Federal)
The SEC has issued notices seeking public comment on applications for three exchange traded funds (ETFs) to trade spot Ether.
On April 2, 2024, the SEC filed notices to open public comment periods on three spot Ethereum (ETH) exchange-traded fund (ETF) applications from:
  • Fidelity Ethereum Fund. The SEC issued a notice of filing of Amendment No. 1 filed with the SEC by Cboe BZX Exchange, Inc. (BZX) on March 15, 2024 to the proposed rule change to list and trade shares of the Fidelity Ethereum Fund (Fidelity ETH Trust) under BZX Rule 14.11(e)(4), which governs the listing and trading of commodity-based trust shares (SEC Release No. 34-9988). On November 17, 2023, BZX had filed with the SEC its original proposed rule change to list and trade shares of the Fidelity ETH Trust under BZX Rule 14.11(e)(4).
  • Grayscale Ethereum Futures ETF. The SEC issued a notice of filing of Amendment No. 1 filed with the SEC by NYSE Arca, Inc (NYSE Arca) on March 15, 2024 to a proposed rule change to list and trade shares of the Grayscale Ethereum Trust (ETH) ETF (Grayscale ETH ETF) under NYSE Arca Rule 8.201-E, which governs the listing and trading of trust-issued receipts on the exchange of commodity-based trust shares (NYSE Arca Rule 8.201-E) (SEC Release No. 34-99887). On October 10, 2023, NYSE Arca had filed with the SEC its original proposed rule change to list and trade shares of the Grayscale ETH ETF under NYSE Arca Rule 8.201-E.
  • Bitwise Ethereum ETF. The SEC issued a notice of filing of a proposed rule change filed with the SEC by NYSE Arca on March 28, 2024 to list and trade shares of the Bitwise Ethereum ETF (Bitwise ETH Trust) under NYSE Arca Rule 8.201-E (SEC Release No. 34-99889).
Interested persons are invited by the SEC to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Securities Exchange Act of 1934, as amended (Exchange Act) and Rule 19b-4 thereunder (Exchange Act).
The comment period on all three applications will be open until April 29, 2024, which is 21 days after publication of these SEC notices in the Federal Register.
On January 10, 2024, the SEC issued an omnibus order granting accelerated approval of the first eleven US-listed spot bitcoin ETFs under to Section 19(b)(1) of the Exchange Act. Those spot bitcoin ETF products offered institutional and retail investors exposure to bitcoin without holding it directly (see Legal Update, SEC Approves Eleven Spot Bitcoin Exchange Traded Funds (ETFs)). Since the omnibus order was issued, the SEC has received a number of new applications to trade US-listed spot bitcoin ETFs and new applications to trade US-listed spot Ethereum ETFs (see Crypto ETF Tracker).
Commentators have noted that the SEC may have to make a final decision about certain unapproved ETF proposals by May 23, 2024 after the SEC postponed its decision on spot Ethereum ETF applications from both:
  • BlackRock affiliate iShares Ethereum Trust on March 4, 2024, when the SEC issued an order instituting proceedings to determine whether to approve or disapprove a proposed rule change to list and trade shares of the iShares Ethereum Trust under Nasdaq Rule 5711(d) (SEC Release No. 34-99665).
  • Fidelity affiliate Fidelity Ethereum Fund on March 4, 2024, when the SEC issued an order instituting proceedings to determine whether to approve or disapprove a proposed rule change to list and trade shares of the Fidelity Ethereum Fund under BZX Rule 14.11(e)(4) (SEC Release No. 34-99667).
SEC approval of the spot bitcoin ETFs was in part forced by a previous court ruling against the SEC involving Grayscale's request to convert its bitcoin trust to an ETF (see Legal Update, Grayscale Investments, LLC v. SEC: Court Finds Denial of Spot Bitcoin ETF Arbitrary and Capricious).
For details on crypto regulation in the US, see Cryptocurrency and Virtual Currency Regulatory Tracker.