BlackRock, a global investment management giant, is challenging the U.S. Securities and Exchange Commission’s (SEC) differentiation between crypto spot and futures exchange-traded fund (ETF) applications. The SEC’s reluctance to approve spot-crypto ETFs has sparked controversy. BlackRock’s recent move to launch an “iShares Ethereum Trust” spot-ETH ETF has raised important questions about these distinctions.
The SEC’s Divergent Treatment
The SEC has approved multiple crypto futures ETFs but hasn’t yet given the green light to a single spot-crypto ETF. The regulator claims that futures ETFs are better regulated under the 1940 Act compared to the 1933 Act that covers spot-crypto ETFs. Additionally, the SEC prefers regulation and surveillance-sharing agreements, favoring the Chicago Mercantile Exchange’s (CME) digital asset futures market.
BlackRock’s Argument
BlackRock challenges the SEC’s preference for the 1940 Act. Arguing that it’s irrelevant because it imposes restrictions on ETFs and sponsors, not the underlying assets. The distinction between the registration of ETH futures ETFs under the 1940 Act and spot ETH ETPs under the 1933 Act, according to BlackRock, holds no substantive difference.
ETH Futures vs. Spot ETH
The SEC’s approval of crypto futures ETFs on the CME implies confidence in the CME’s surveillance to detect spot-market fraud affecting spot ETPs. BlackRock contends that this position leaves the SEC with no justifiable reason to reject their spot-ETH ETF application.
The Upcoming Breakthrough
Market experts anticipate that the SEC may soon approve the first spot crypto ETF, potentially linked to Bitcoin. Bloomberg ETF analysts, James Seyffart and Eric Balchunas, predict a 90% chance of approval before January 10th next year.
Conclusion
BlackRock’s challenge to the SEC’s distinction between crypto spot and futures ETFs highlights the need for a more uniform and equitable regulatory framework. As the crypto market continues to evolve, it becomes increasingly important to ensure that all types of crypto-based ETFs are subject to consistent and appropriate oversight. Investors and industry participants eagerly await the SEC’s decision on the pending spot-crypto ETFs, which could signal a significant development in the world of digital asset investment.
