Crypto for Advisors: Decoding the Ether ETF Filings

U.S. SEC Chair Gary Gensler recently stated that he expects to see spot Ether ETFs available as early as September. Roxanna Islam, from VettaFi, decodes the issuer’s S-1 filings for these ETFs and discusses the progress made since the approvals of the spot bitcoin ETFs earlier this year.
In Ask an Expert, Eric Tomaszewski from Verde Capital Management answers common questions about the availability of Ether ETFs and why they matter to investors.
– Sarah Morton
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For fans of crypto, ETFs, or both, the potential launches of spot ether ETFs have added to the excitement that began earlier this year with the spot bitcoin ETF launch. As potential approvals approach, there has been discussion about certain documents like 19b-4s and S-1s and their relevance. While a lot of their content is standard for SEC filings, there are several good takeaways hidden among the legal jargon. Based off S-1s and other industry data, here is what we know so far about spot ether ETFs.
What are 19b-4 and S-1 filings?
So-called 19b-4 documents are filed by exchanges (e.g., the New York Stock Exchange or NASDAQ) to inform the SEC of a proposed rule change. These filings are required to list a new type of ETF. Issuers were asked to amend their 19b-4s around May 20, during which most of the issuers removed provisions for staking. The SEC approved amended versions of these from eight issuers – VanEck, 21Shares, Grayscale, Fidelity, Invesco, iShares, Franklin and Bitwise – soon afterward, on May 23. (Later, ProShares also threw their hat into the ring.) While this means that the SEC will likely approve spot ether ETFs, we are still waiting on official approval for S-1s (registration statements) before these ETFs start trading. Spot ether ETF issuers have been filing amended S-1s in response to SEC comments – often a good sign that talks are progressing. Final approval will likely be within 90 days of the initial 19b-4 approvals, which means it could be sometime this summer (and likely sooner than later).
What do S-1s tell us about spot ether ETFs?
Bottom Line:
Overall, we know more about spot ether ETFs than we did about spot bitcoin ETFs given the precedent set earlier in this year. As we look forward to potential spot ether ETF approval, we might see the pathway ahead for other crypto ETFs (i.e., Solana) become more clear.
– Roxanna Islam, Head of Sector and Industry Research, VettaFi
Q: What excites you about an Ethereum ETF?
A: The recent initial approval of the first step for an Ethereum ETF represents a significant milestone for the digital asset industry, partly because it could create easier access for the average person.
In addition, final approval could create a regulatory framework for institutional adoption, which is a market estimated to be in excess of $100 trillion globally.
Bigger picture, an ETF launch could further the legitimacy of the asset class and overall acceptance, which would ultimately encourage more attention and inflows. This would be a big win for the validation of the digital asset space and future inclusion in diversified portfolios.
Q: What are some of the risks with an Ethereum ETF?
A: There is a concern that spot ETF approvals could potentially create massive players who could significantly influence validator power over time. The same applies for counterparty, centralization and concentration risks.
Q: What are some of the risks with Ethereum on-chain?
A: I believe that the risks differentiate more broadly when you consider Ethereum on-chain being used within different ecosystems and projects. This arguably creates technological, regulatory, financial, and security risks. All that said, risk is differentiated and rewarded.
Q: What are some opportunities or reasons someone should consider Ethereum on-chain?
A: Being on-chain opens a world of possibilities, permissionless innovation and inclusive financial services.
As an example, staking allows participants to earn rewards for their participation in securing the Ethereum network, which in some ways directly embodies the ethos of the Ethereum ecosystem and the community values.
Beyond staking, there are countless ways to support projects which may result in a range of benefits that go beyond monetary reasons. Community and culture are the cornerstones of the digital world. An ETF arguably misses many of these key attributes.
– Eric Tomaszewski, Financial Advisor, Verde Capital Management
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
Edited by Bradley Keoun.
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Roxanna Islam is the Head of Sector & Industry Research at VettaFi.
Sarah Morton is Chief Strategy Officer and Co-founder of MeetAmi Innovations Inc.