SEC Approves Nasdaq, CBOE, and NYSE Ether ETF Listings in Surprise Move

On Thursday, the U.S. Securities and Exchange Commission (SEC) approved applications from Nasdaq, CBOE, and NYSE to list exchange-traded funds (ETFs) linked to the price of ether, reports Reuters. This move could allow these products to begin trading later this year. Although ETF issuers still need final approval before launching, Thursday's decision marks a surprising victory for these firms and the cryptocurrency industry, which had anticipated the SEC to reject the filings.

Nine issuers, including VanEck, ARK Investments/21Shares, and BlackRock (BLK.N), are eager to launch ETFs tied to the second-largest cryptocurrency. This follows the SEC's January approval of bitcoin ETFs, a milestone for the industry. Andrew Jacobson, vice president and head of legal at 21Shares, called it "an exciting moment for the industry" and "a significant step" towards trading these products.

Thursday was the SEC's deadline to decide on VanEck's filing, and market participants were expecting a rejection due to the SEC's lack of engagement. However, on Monday, SEC officials unexpectedly asked the exchanges to quickly refine their filings, causing a scramble to complete weeks of work in just days. The reason for the SEC's apparent change of heart remains unclear.

Rob Marrocco, global head of ETP listings at Cboe Global Markets, highlighted the benefits that spot bitcoin ETFs have already provided and expressed confidence that spot ether ETFs would offer similar protections for U.S. investors. Nasdaq and NYSE declined to comment on the matter, and SEC Chair Gary Gensler, known for his skepticism towards crypto, also declined to comment at an industry event. An SEC spokesperson stated that the agency would not comment further.

While the exchange applications sought SEC approval for a rule change necessary to list the new products, the issuers still need the SEC to approve ETF registration statements detailing investor disclosures before they can start trading. Unlike the exchange filings, there is no set timeline for the SEC to decide on these statements. Industry insiders are uncertain about the duration of this process. Some sources indicated that many issuers are ready to launch, but the SEC's corporate finance division is expected to request changes and updates in the coming days and weeks.

The SEC had rejected spot bitcoin ETFs for over a decade due to concerns about market manipulation but was compelled to approve them after Grayscale Investments won a court challenge last year. Sui Chung, CEO of CF Benchmarks, which provides indices for several bitcoin and ether ETFs, noted that ether is more complex than bitcoin, potentially prolonging the SEC's review process. However, with the established template from bitcoin ETFs, he suggested the SEC has limited scope for delays.

Over $30 billion has been invested in crypto ETFs by a range of investors, including hedge funds, wealth advisors, and retail investors. Thursday's decision provides further momentum for the cryptocurrency industry’s integration into mainstream finance. This week, the UK regulator also approved listed cryptocurrency products, and the U.S. House of Representatives passed a landmark bill seeking regulatory clarity for cryptocurrencies. While this bill still needs Senate approval, its strong bipartisan support signifies a significant endorsement for the industry.