The US spot bitcoin ETFs that launched in January spawned from a decade-long effort.
While the winding road for proposed spot ether funds hasn’t been as long, that doesn’t mean it hasn’t been eventful.
The Securities and Exchange Commission on Thursday will take a step toward either allowing ether ETFs to trade, or kicking the proverbial can down the road on such products.
With the potential for yet another crypto ETF milestone in 2024, it’s worth accounting for the events that led to this moment.
- December 2017: CME launches bitcoin futures
The new offering was set to offer transparency, price discovery and risk transfer capabilities “given increasing client interest in the evolving cryptocurrency markets,” CME Group CEO Terry Duffy said at the time.
It also brought the largest crypto asset to a derivatives marketplace regulated by the CFTC.
- February 2021: CME introduces ether futures
Roughly three years after the bitcoin futures launch, CME said ETH futures would allow an array of clients to hedge ether positions in the spot market, for example.
Derivatives have become “the avenue of choice for institutions to access cryptocurrencies,” CF Benchmarks Sui Chung said in a statement at the time.
- October 2021: The US securities regulator gives the green light to ETFs holding bitcoin futures contracts.
The approval came just two months after SEC Gary Gensler said during the Aspen Security Forum that the SEC would “look forward” to reviewing filings limited to CME-traded bitcoin futures contracts.
Fund firm ProShares was the first to market with such a product. Its Bitcoin Strategy ETF (BITO) grew to more than $1 billion in assets just days after launching.
- June 2022: Grayscale Investments launches a lawsuit against the SEC.
The crypto asset manager’s petition for review with the DC Court of Appeals came after the agency rejected the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF.
The firm argued that the SEC’s decision to allow bitcoin futures ETFs to launch, but not the conversion of GBTC, was “arbitrary and capricious.”
- May 2023: Issuers submit, withdraw ether futures ETF applications
Grayscale and Bitwise are among the issuers who submit ether futures ETF filings before ditching those plans about a week later.
The actions are reminiscent of VanEck and ProShares revealing an intent to launch ether futures ETFs in August 2021 before pulling those plans just two days later.
- July/August 2023: Ether futures filings surface again
Volatility Shares renewed the ether futures ETF effort in late July via an application to the SEC. Other fund groups followed suit in the following days.
The ETF firm ultimately ditched its bid after appearing to have lost its first-mover edge.
Read more: SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?
- August 2023: Grayscale notches legal victory over the SEC
Judges ruled that the SEC did not properly explain its different treatment of similar products when it rejected Grayscale’s bid for a spot bitcoin ETF.
Put another way, they wrote: “The commission’s unexplained discounting of the obvious financial and mathematical relationship between the spot and futures markets falls short of the standard for reasoned decision-making.”
Plain and simple, this court win against the regulatory agency forced the SEC to reconsider its ruling and played a big part in ultimately (spoiler alert!) paving the way for spot bitcoin ETFs to begin trading just months later.
Read more: ‘Game on’: SEC opts not to appeal Grayscale’s court win
- September 2023: Issuers start applying for spot ether ETFs
VanEck, which first revealed plans for a US spot ether ETF in 2021, re-upped its bid in early September 2023. So too did Ark Invest and 21Shares. This started the 240-day SEC review clock that expires today.
Those ultimately filing for similar products include BlackRock, Fidelity, Grayscale, Franklin Templeton, Invesco, Bitwise and Hashdex.
- October 2023: Six ether futures ETFs begin trading in the US
VanEck, Bitwise and ProShares launch ether futures funds in October. Valkyrie Investments also began adding ether futures contracts to its bitcoin futures ETF around that time.
A number of industry watchers call the initial flows into these products underwhelming.
Neena Mishra, director of ETF research at Zacks Investment Research, attributed the lack of demand to investors waiting for pure exposure via spot ETFs.
“There are now hopes that we could see a spot bitcoin ETF approved much sooner than anticipated,” she told Blockworks at the time. “The debut of ether spot ETFs would not be far behind.”
- January 2024: The SEC approves spot bitcoin ETFs in a landmark decision
The long-awaited approval had some asking when spot ether ETFs would follow.
Notably, SEC Chair Gary Gensler said in a Jan. 10 statement — the day the SEC approved the spot bitcoin funds — that the commission’s action was “cabined to ETPs holding one non-security commodity, bitcoin.”
“It should in no way signal the commission’s willingness to approve listing standards for crypto asset securities,” Gensler added.
- March 2024: Bitwise files for a spot ether ETF and includes research in its filing
The crypto asset manager applied for such a fund a bit later than others. It also published a correlation analysis to replicate the SEC’s methodology in evaluating bitcoin.
“We believe the results show strong correlation between the ETH spot market and CME ETH futures market, at a level substantially similar to the findings of the SEC’s analysis in the spot bitcoin ETF approval order,” Bitwise wrote in an X post at the time.
- April 2024: Consensys sues the SEC, claiming it seeks to regulate ETH as a security
The company behind MetaMask claims in its suit against the SEC that the agency seeks to regulate ETH as a security “even though ETH bears none of the attributes of a security.”
The SEC’s stance on whether it views ether a security or a commodity has not exactly been clear.
In a 2018 speech, William Hinman — then-director of the SEC’s division of corporation finance — said “current offers and sales of Ether are not securities transactions.”
When asked if ETH is a security or a commodity during a House Financial Services Committee meeting in April 2023, Gensler did not give a clear answer.
Legal sources tell Blockworks that this lack of clarity could hurt the chance of spot ether ETF approval in the near-term.
Read more: SEC has been investigating ETH for over a year, new court filing shows
- May 2024: Ether ETF approval optimism abound in possible politically-motivated move
Bloomberg Intelligence analysts on Monday upped their odds of ether ETF-related 19b-4 approval from 25% to 75%, sending ETH’s price upward.
The analysts, James Seyffart and Eric Balchunas, cited increased SEC engagement with fund issuers, possibly spurred by a number of Democrats looking to pivot their anti-crypto stance.
Issuers then submitted amended ether ETF filings on Tuesday and Wednesday that clarify the proposed funds would not stake their holdings.
Read more: Politics, amendments, staking: Making sense of the ether ETF developments
- May 2024: Crypto sees increased bipartisan support
The House of Representatives passed the Financial Innovation and Technology for the 21st Century Act Wednesday — marking the second crypto-focused piece of legislation to advance in Congress this month.
Seventy-one Democrats joined Republicans in voting yes.
That same day, five congressmen — three Republicans and two Democrats — penned a letter to Gensler urging the SEC to approve spot ether ETFs.
Now, we can only wait to see what happens next.
