Summary: BlackRock, a major investment management firm, has raised concerns over the U.S. Securities and Exchange Commission’s (SEC) unequal treatment of spot-crypto and crypto-futures exchange-traded fund (ETF) applications. The firm’s application for a spot-Ether (ETH) ETF, named the “iShares Ethereum Trust,” questions the SEC’s basis for consistently rejecting spot crypto ETFs while approving crypto futures ETFs.
In its official application, BlackRock argues that the SEC’s regulatory distinctions between futures and spot ETFs lack legitimacy. The SEC has approved several crypto futures ETFs, citing the purportedly superior regulation and consumer protections provided by the 1940 Act, in contrast to the 1933 Act covering spot-crypto ETFs.
BlackRock contends that the SEC’s preference for the 1940 Act is irrelevant, as it imposes restrictions on ETFs and sponsors, not the underlying assets. The firm highlights that the approved crypto futures ETFs are based on the underlying spot ETH market, making the regulatory distinction arbitrary.
The SEC’s emphasis on surveillance-sharing agreements with the Chicago Mercantile Exchange’s (CME) digital asset futures market is also challenged by BlackRock. The firm asserts that the SEC has already acknowledged the effectiveness of CME surveillance in detecting spot-market fraud, diminishing the rationale for rejecting spot-crypto ETFs.
BlackRock concludes that the SEC lacks justifiable grounds to deny the application, especially considering its approval of crypto futures ETFs. Many industry analysts anticipate the imminent approval of the first SEC spot crypto ETF, with a Bitcoin-related ETF predicted to have a 90% chance of approval before January 10, according to Bloomberg ETF analysts James Seyfarth and Eric Balchunas.
