SEC Asks Nasdaq, Cboe To Refine Spot Ethereum ETF Applications

The U.S. Securities and Exchange Commission (SEC) has requested Nasdaq and CBOE to revise their applications to list spot Ethereum (ETH) Exchange-Traded Funds (ETFs). This unexpected request suggests that the agency may be close to approving these filings, providing a much-needed boost for the entire cryptocurrency industry.

Also Read: Ethereum Targets $4,000 as Odds of Spot Ether ETF Improve

Historically, the SEC has been cautious about approving crypto-related financial products, making this development particularly noteworthy. Meanwhile, the applications submitted by Nasdaq and CBOE are the first step in a two-step approval process.

The SEC Expects to See Some Changes

The United States’ Securities and Exchange Commission must decide by the end of the week whether to approve applications filed by CBOE to list ETH ETFs provided by VanEck and ARK Investments/21Shares. Reports say that SEC officials have unexpectedly engaged with Nasdaq, CBOE, and NYSE, asking them to quickly make updates and changes to their filings.

This kind of request typically precedes approval, according to individuals familiar with the process. These stock exchange applications (19b-4s) seek SEC approval for a rule change necessary to list new products. However, the issuers still need the SEC to approve the ETF registration statements (S-1s) before they can start trading.

Also Read: Spot Ethereum ETFs Will Be Approved This Week

Unlike the exchange filings, there is no set timeframe in which the SEC must decide on the registration statements, meaning it could still take several months for the ETH ETFs to actually start trading. Market participants expected the SEC to reject the spot ETH ETF applications, citing discouraging and one-sided meetings with the regulator. The agency’s recent request for updates to the filings was a surprising turn of events.

Legal Impediments Can Delay Approval

The SEC’s review process involves multiple steps. One of these steps is the 19b-4 filings. These are requests submitted by national securities exchanges when they want to change rules or introduce new products.

Another important step is the S-1 registration statements. These are initial registration forms required for new securities offered to the public. They provide the SEC and potential investors with detailed information about the company’s operations.

The SEC must approve both the 19b-4s and the S-1s for the ETFs to be legally sold to the public. And even if the 19b-4s are approved, the SEC could delay the approval of the S-1s. This means legally, they could take longer to review and approve these documents.

ETF Issuers Make Some Changes

Fidelity Investments has updated its S-1 application with the SEC for a spot Ethereum ETF, opting not to stake the underlying Ethereum tokens. As for Grayscale, renowned Bloomberg analyst James Seyffart revealed that the company has filed an updated 19b-4 for its Ethereum Mini Trust.

UPDATE: @Grayscale just filed an updated 19b-4 for their Ethereum Mini Trust. We should see a bunch of these come in today. pic.twitter.com/MuuZihyw8p

— James Seyffart (@JSeyff) May 21, 2024

Grayscale said that approving the Grayscale Ethereum Mini Trust will benefit current ETHE shareholders. They’d keep their same exposure but with the bonus of a lower fee spread across both products.

James Seyffart commented on Grayscale’s filings, stating, “Need to clarify. This is actually an initial 19b-4 for Grayscale’s mini Ethereum trust. I don’t think this will be included in the first wave of potential approvals.” This means that Grayscale may face a longer wait for approval compared to other issuers.

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Cryptopolitan reporting by Jai Hamid