š£ Fidelity Ark Invest and Grayscale have so far adjusted proposals to omit plans of staking the fundsā ETH holdings #ETHETFS
š¹As the industry tries to make sense of the evolving bullish signals around possible spot ether ETF approvals, thereās no shame in needing a quick refresher.
šøThe Securities and Exchange Commission is expected to rule on such products by Thursday. With me so far?
š¹Amended filings indicate that prospective ether ETF issuers would not stake the ETH they hold ā a fund feature that segment observers long predicted the SEC to oppose.
ā¦ļøThe SEC has declined to comment
šøAnalysts expect the SEC to decide on so-called 19b-4s ā proposed rule changes filed by exchanges on behalf of the issuers ā before weighing in on S-1 registration statements for each of the planned funds. There could be a delay between the two actions, both of which are needed for the products to hit the market.
ā¦ļøGetting up to speed on accelerated movement
š¹Various industry watchers had voiced pessimism of SEC spot ether ETF approval until yesterday, when Bloomberg analysts upped their odds of SEC approval from 25% to 75%.
šøTo be fair, Coinbase research analyst David Han had said last week he thought the market might be āunderestimating the timing and oddsā of US ETH fund approvals.
š¹One person familiar with the matter indeed told Blockworks on Monday: āConversations are progressing.ā
ā¦ļøSpot ether ETF decision week just got a bit more interesting
šøIndeed, the SEC reportedly asked the exchanges which spot ether ETFs would list to update their 19b-4 documents. SEC staff told the exchanges Monday that it was leaning toward approving the products, Barronās reported, citing āpeople familiar with the matter.ā
š¹Jon Ammons, a partner in Reed Smithās on-chain crypto a#nd digital asset group, told Blockworks that the SEC has sometimes asked for 11th-hour modifications if a particular issue comes up late in the process.
šøāBut I would say it is rare for them to sit on a known issue and then ask for changes at the last minute,ā he added.
š¹The SECās possible change of heart could be linked to recent political developments just months ahead of the presidential election. With former president Donald Trump essentially pledged to be a pro-crypto president, Democrats are likely feeling additional pressure to potentially pivot their stance on the issue, Galaxy CEO Mike Novogratz said last week.
ā¦ļøBitcoin may stay in a āconsolidation phaseā until US election: Novogratz
šøTwelve Democratic senators joined Republicans last week to pass a resolution to overturn the SECās Staff Accounting Bulletin (SAB) 121.
š¹Rashan Colbert, head of policy at dYdX Trading, said he expects the House to continue that momentum by passing the Financial Innovation and Technology for the 21st Century Act with a bipartisan majority this week.
ā¦ļøAnd then thereās this about-face from the SEC.
šøāThose whoāve been deeply involved in crypto policy, who attempt to think about them from first principles, realize that these are not fundamentally partisan issues,ā Colbert told Blockworks. āSome are attempting to make them so, but theyāre not.ā
ā¦ļøIssuers remove staking-related language
š¹Fidelity Investments amended the registration statement, or S-1, for its Fidelity Ethereum Fund Tuesday morning.
šøThe filing signaled the firm intends to not stake the ether it holds. Staking ether is the process of depositing ETH to help secure the Ethereum blockchain ā and earning yield on that ETH for doing so.
š¹Fidelityās adjustment came after Ark Invest and 21Shares, which previously proposed for their planned fund to stake the fundās ETH, also took out such language in a May 10 filing.
šøOh yeah, and NYSE Arca filed a 19b-4 on Tuesday on behalf of Grayscale for its Ethereum Mini Trust.
š¹āNeither the trust, nor the sponsor, nor the custodian, nor any other person associated with the trust will, directly or indirectly, engage in action where any portion of the trustās ether becomes subject to Ethereum proof-of-stake validation or is used to earn additional ether or generate income or other earnings,ā the document states.
šøMore similar 19b-4 and S-1 amendments are expected ahead of the SECās ruling.
š¹Sumit Roy, a senior analyst at ETF.com, told Blockworks in March that it would be hard to imagine the SEC allowing potential ether ETFs to stake their holdings.
šøāStaking is a feature that makes ether and other proof-of-stake cryptocurrencies more like securities, which the SEC wonāt look favorably upon,ā Roy noted at the time.
ā¦ļøSo what does this mean?
š¹Coinbaseās Han sought to explain the possible reason for the SECās previous lack of engagement with prospective ether ETF issuers in a Monday X post.
šøWhile staking would have made ether ETFs different than the already-approved bitcoin ETFs, he noted many details ā like custodian responsibilities, net asset value calculation and benchmark rates, for example ā are similar to those for the BTC funds.
š¹āIf thereās no staking, itās not clear to me why spot ETH ETFs would be mechanically different from spot BTC ETFs,ā Han added. āHence, the relative silence on S-1 communication isnāt particularly surprising to me, since itās not clear what would need updating.ā
šø21Shares co-founder made a similar argument in a March interview with Blockworks co-founder Jason Yanowitz ā pointing out the similarities between the approved bitcoin products and the ether ETF proposals.
š¹āTheyāre the same structure, the same custodians, the same disclosures,ā Snyder said at the time. āItās very internally consistent. That means thereās less to look at.ā
ā¦ļø21Shares president āless bearishā than Cathie Wood on ether ETF approval
šøStill, the SEC could deny the spot ether ETF applications, particularly given the regulatorās historical hesitation to clearly label ETH as a security or a commodity.
š¹āThe SEC could therefore say that ETH ETPs should not be Commodity-Based Trust Shares,ā Ammons said. āBut this would likely ignite the jurisdictional tug-of-war between the SEC and CFTC over the classification of ether.ā
šøSEC Chair Gary Gensler said in a Jan. 10 statement ā the day the agency approved US spot bitcoin ETFs ā that the decision was ācabined to ETPs holding one non-security commodity, bitcoin.ā
š¹Jake Chervinsky, chief legal officer at crypto fund Variant, noted that the SEC approving spot ether ETFs would likely mean they are admitting unstaked ETH is not a security.
šøāThat would be a major policy move from a commission that has consistently refused to acknowledge any asset other than BTC as a non-security commodity,ā he wrote on X. āHave we earned it?ā