US poised to greenlight new wave of crypto ETFs in the fall

The Securities and Exchange Commission is poised to allow the first exchange-traded funds based on Ether futures, a major win for several firms that long have sought to offer the products.

The regulator isn’t likely to block the products, which would be based on futures contracts for the second-largest cryptocurrency, according to people familiar with the matter. Nearly a dozen companies, including Volatility Shares, Bitwise, Roundhill and ProShares, have filed to launch the ETFs.

It couldn’t immediately be determined which funds would get green lights. Officials have indicated that several might by October, said one of the people, who asked not to be identified discussing information that hasn’t been made public. The SEC declined to comment.

The regulator has refused to allow an ETF based directly on a cryptocurrency, but in late 2021, it started allowing trading in a fund that involves Bitcoin futures contracts that trade on the Chicago Mercantile Exchange. Speculation has been mounting that a product with Ether futures, which also trade on CME, would be next.

Despite that buzz, SEC approval for a product involving derivatives in the second-biggest cryptocurrency has been slow. Bitcoin, the world’s biggest cryptocurrency, commands a market value of roughly $512 billion, while Ether’s is $195 billion, according to CoinGecko. 

Meanwhile, the SEC remains locked in a battle with the industry over its pushback against ETFs based on Bitcoin itself. In one high-stakes case, a panel of U.S. federal appellate court judges is set to make a decision on a lawsuit by Grayscale Investments challenging the SEC’s rejection of an application to convert its Bitcoin trust into an ETF.

The SEC has argued that the crypto space is plagued with investor hazards. The agency has expressed concern that prices could be manipulated and liquidity might be insufficient, and that Bitcoin’s drastic price swings may be too much for individual investors. 

Still, several firms, including BlackRock Inc., recently filed applications to list ETFs based directly on Bitcoin. The BlackRock filing in June helped push the token’s price above $31,000. It has since spent the majority of July and August hovering around $29,000. On Thursday, Bitcoin traded near $26,000. Ether, at $1,600, has dropped about 11% so far this month.