The U.S. Securities and Exchange Commission (SEC) has made a surprising request to Nasdaq and CBOE to revise their applications for spot Ethereum Exchange-Traded Funds (ETFs). This unexpected move indicates that the agency may be nearing approval of these filings, which would be a significant boost for the cryptocurrency industry as a whole.
In the past, the SEC has been cautious about approving financial products related to cryptocurrencies, making this development particularly noteworthy. The applications submitted by Nasdaq and CBOE are the initial step in a two-step approval process.
The SEC has asked Nasdaq, CBOE, and NYSE to make quick updates and changes to their filings, a request that is typically made before approval, according to those familiar with the process. These stock exchange applications (19b-4s) seek SEC approval for a rule change that is necessary to list new products. However, before they can begin trading, the issuers still need the SEC to approve the ETF registration statements (S-1s).
Unlike the exchange filings, there is no specific timeframe for the SEC to decide on the registration statements, so it could still be several months before the spot Ethereum ETFs actually start trading. Market participants were anticipating the SEC to reject the applications, as they had discouraging and one-sided meetings with the regulator. Therefore, the agency’s request for updates to the filings came as a surprise.
Approval can be delayed due to legal impediments. The SEC’s review process involves multiple steps, including the 19b-4 filings, which are requests made by national securities exchanges to change rules or introduce new products. Another crucial step is the S-1 registration statements, which are initial registration forms required for new securities offered to the public. These statements provide detailed information about the company’s operations to the SEC and potential investors.
For the ETFs to be legally sold to the public, the SEC must approve both the 19b-4s and the S-1s. Even if the 19b-4s are approved, the SEC can still delay the approval of the S-1s, which means that the review and approval process for these documents could take longer.
In terms of specific issuers, Fidelity Investments has updated its S-1 application for a spot Ethereum ETF with the SEC, choosing not to stake the underlying Ethereum tokens. Grayscale, on the other hand, has filed an updated 19b-4 for its Ethereum Mini Trust, with the aim of benefiting current ETHE shareholders by providing the same exposure but with a lower fee spread across both products.
However, it is worth noting that Grayscale may face a longer wait for approval compared to other issuers, as their filing is an initial 19b-4 and may not be included in the first wave of potential approvals, according to Bloomberg analyst James Seyffart.
Overall, these recent developments indicate that the SEC is making progress towards approving spot Ethereum ETFs, which could have a significant impact on the cryptocurrency industry.