Ark 21Shares Revamps Non-Staking Ethereum ETF Proposal in Attempt for SEC Approval

Efforts to implement a spot ETH ETF in the United States are intensifying but face continued hesitation from the Securities and Exchange Commission (SEC), which has traditionally taken a cautious stance toward cryptocurrency-based products. Recently, the first spot Bitcoin ETF was given the green light despite substantial delays, however, the SEC’s silence on Ether-based ETFs continues.

With just a few weeks to go before the deadline, Ark Invest and 21Shares, led by renowned Cathie Wood, have significantly revised their Ether spot ETF proposal. In a strategic change, they eliminated the staking option from their proposal. Previously, the document indicated that “the sponsor may, from time to time, stake a portion of the Trust’s assets through one or more trusted staking providers.” This decision appears to be an attempt to simplify SEC approval by removing potentially controversial elements.

This review comes in a context where staking is a crucial component of the functioning of the Ethereum network, offering rewards in ETH. 21Shares’ removal of this option could be interpreted as both a conservative maneuver and a strategy to avoid further regulatory hurdles.

Eric Balchunas, ETF expert at Bloomberg, comments on the proposal update: “21Shares is leaving its proposal ‘in shape’ for SEC comment.” He suggests this may be a ploy to “give the SEC one less thing to use in its rejection.”

Hmmmm. Interesting. While it may seem like this is them getting their docs in shape based on SEC comments (which would be good news) there hasn’t been any comments. So its prob either a Hail Mary or maybe trying to give SEC one less thing to use in their rejection. Not sure (yet) https://t.co/CeQwj5ktPn

— Eric Balchunas (@EricBalchunas) May 10, 2024

As the deadline approaches, anxiety is growing about the SEC’s possible response. Historically, the SEC has used the maximum period of 240 days to decide on such proposals, a window that for many issuers ends in May.

Additionally, the ongoing investigation into the Ethereum Foundation and comments from market figures like Michael Saylor, who suggest that the SEC could classify post-merger Ethereum as a security, only add more uncertainty to the process.

The SEC has also shown resistance to ETH staking, evidenced by several regulatory actions against staking products. On the other hand, the Commodity Futures Trading Commission (CFTC) recently classified ETH as a commodity, which led to the approval of ETH futures ETFs.

The SEC’s silence keeps ETF issuers on alert, tweaking their proposals in hopes of finding a path to approval. The SEC’s final decision, whether approval or rejection, will be crucial in defining the immediate future of Ether-based financial products.

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