Blackrock chief executive Larry Fink told CNBC on 12 January that an exchange traded fund holding spot ether âmakes sense.â The remark arrived one day after eleven spot bitcoin ETFs began trading on Nasdaq, Cboe along with NYSE Arca. Fidelity, VanEck, Invesco-Galaxy, Ark-21Shares, Hashdex in addition to Grayscale each submitted Form 19b-4 filings that seek permission to list similar vehicles for ether. The Securities but also Exchange Commission must respond to VanEck’s proposal by 23 May. The remaining applications face deadlines between late May and early August.
Fink’s comment carries weight because Blackrock’s iShares Bitcoin Trust gathered more than one billion dollars in assets within four trading sessions. The firm’s earlier spot bitcoin ETF proposal, filed in June 2023, altered market expectations and preceded a court ruling that forced the SEC to reconsider its denial of Grayscale’s conversion request. The same banks and issuers that profited from the bitcoin rollout now hope to repeat the process with ether.
Regulatory acceptance for a spot ether ETF confronts a hurdle absent from the bitcoin precedent – the SEC has never declared ether a non security commodity. Chair Gary Gensler – speaking to CNBC on 11 January, limited the bitcoin approval to âone non security, commodity called bitcoin.â The statement leaves open the possibility that the agency classifies ether as an investment contract. Such a determination would oblige issuers to register under the Investment Company Act of 1940, a path none of the current filers have pursued.
Preston Byrne, partner at Brown Rudnick, notes that only the New York Attorney General has alleged in an enforcement action that ether constitutes a security. âThe 2014 token sale by the Ethereum Foundation sits outside the federal statute of limitations,â Byrne said. âCounsel for the ETF sponsors will disclose the minority view in the prospectus. I do not expect the SEC to block the products solely on that ground.â
Bloomberg Intelligence analyst Eric Balchunas assigns a seventy percent probability to approval by the May deadline. He bases the estimate on the SEC’s prior approval of ether futures ETFs in October 2023 and on the correlation between CME ether futures prices and spot markets. The regulator cited tight arbitrage between futures and spot bitcoin as a safeguard against manipulation when it cleared the spot bitcoin ETFs. A comparable argument applies to ether.
Futures-based ether ETFs already trade in the United States. ProShares, VanEck next to Bitwise launched the first such products in October 2023. Aggregate assets under management across the six listed futures ETFs total less than three hundred million dollars. Daily volume rarely exceeds twenty million shares. The tepid reception reflects investor preference for direct exposure to spot prices rather than monthly roll costs embedded in futures contracts.
The SEC must weigh the precedent set by the bitcoin approvals against lingering questions over ether’s legal status. Staff attorneys have asked exchanges to provide additional data on ether custody arrangements – staking rewards, and the concentration of validator nodes. Responses to those questions will shape the final decision due in May.