The SEC could approve ETFs on Ethereum futures

The SEC needs to evaluate four new applications related to Ethereum futures ETFs. 

This is what Bloomberg Intelligence analyst Henry Jim revealed. 

ETFs on ETH futures

The SEC has long since approved ETFs based on futures contracts on the price of Bitcoin, so it is not at all strange that now someone wants to issue ETFs based on futures contracts on the price of Ethereum on the US exchanges. 

These are four companies well known for these kinds of financial derivatives, including VanEck, ProShares, Bitwise, and Roundhill, adding to the previous Volatility Shares initiative. 

What is curious is that these four applications came to the SEC almost all at once in the last few days. 

The reason seems to be that, after Volatility Shares submitted its application last week, the SEC indicated its willingness to publicly consider similar products. 

In other words, the agency’s acceptance of Volatility Shares’ application would seem to be positive, although it has not yet been evaluated or approved, and this has set the tone for other similar initiatives. 

Instead, in May it had told companies that wanted to go down a similar path to leave it alone. 

It is worth pointing out that ETFs based on BTC futures have yet to be a resounding success in traditional financial markets, even though these kinds of initiatives probably have more long-term goals than medium/short-term ones. 

Moreover, according to Henry Jim himself, there would be a kind of FOMO (Fear Of Missing Out) on the part of market exchange traded fund (ETF) companies, eager not to miss the opportunity to be among the first to offer traditional markets derivatives on the price of ETH. 

The SEC’s inconsistency beyond Ethereum ETFs

In light of all this, there are many who are accusing the SEC of being inconsistent 

It is worth noting that such an agency, which works specifically to enforce regulations, should not be inconsistent, both because it should treat everyone the same, and especially because the regulations themselves should always be interpreted in the same way. 

However, on the one hand, it is not yet confirmed that the SEC has changed its mind about ETH futures-based ETFs, and on the other hand, the ruling exonerating XRP from the charge of being a security probably exonerated ETH as well. 

In other words, something changed in July, and the SEC may have done nothing more than take note of this change, and react accordingly by erasing its doubts about Ethereum’s alleged nature as an unregistered security. 

Moreover, the agency itself had never yet explicitly and publicly stated that it considered ETH a security, even though its current chairman had in fact admitted it. In other words, until mid-July it is possible to speculate that they were still in doubt from this point of view, just as it is possible to assume that now they might not be. 

ETFs on Bitcoin

Apparently this inconsistency does not seem to be confined to the changing attitude toward requests to create ETFs on ETH futures. 

To be fair, the SEC did not make such a fuss about approving the first ETFs based on Bitcoin price futures contracts, but it has always refused to approve ETFs based on spot Bitcoin, that is, collateralized precisely in BTC, and not in BTC price futures contracts. 

However, this is a somewhat separate issue, because as far as the SEC is concerned, this would not be an inconsistency. 

In fact, the agency has always stated that these are two different financial products regulated differently. So in this case the inconsistency would not lie in the attitude of the SEC, which would simply apply the law as it is written, but in the law itself that forces two very similar financial products to be treated as different. 

In fact, in other jurisdictions, such as Canada, where the law does not distinguish between these two types of financial products, spot Bitcoin ETFs have long since been approved. 

Future development

At this time, the questions are twofold. 

The first is whether indeed the SEC will now also approve ETFs on ETH futures, having perhaps changed its mind on the matter. 

The second is whether sooner or later it will also come to approve those based on spot BTC, such as the one submitted by BlackRock. 

In both cases the affirmative answer is by no means a foregone conclusion, although in both cases to date the likelihood of approval rather than rejection seems greater. 

But the real question is another: what impact will these traditional financial products have on crypto markets over time? 

It is still very difficult to answer this question, given the little information we have about it today, but it seems at least plausible that in the long run they might even come to have some significant impact. 

Certainly what is already evident is that the traditional markets seem to be definitely interested in investing in or speculating on the prices of major cryptocurrencies, perhaps even using traditional derivative financial products that they are already largely accustomed to using.