SEC Approves Spot Ether ETFs (2024)

Many spot ether exchange traded funds (ETFs) will likely begin trading Tuesday, July 23, 2024 after receiving a final approval from the U.S. Securities and Exchange Commission (SEC).

Ether (ETH) is the underlying cryptocurrency of the Ethereum network, which is the second-largest crypto network when measured by market cap.

As of Tuesday morning, the following spot ether ETFs had effective prospectuses, meaning the SEC had cleared them for trading:

• 21Shares Core Ethereum ETF (CETH)
• Bitwise Ethereum ETF (ETHW)
• Fidelity Ethereum Fund (FETH)
• Franklin Ethereum Trust (EZET)
  
• Invesco Galaxy Ethereum ETF (QETH)
• iShares Ethereum Trust ETF (ETHA)
• VanEck Ethereum ETF (ETHV)
• Grayscale Ethereum Trust (ETHE)
• Grayscale Ethereum Mini Trust (ETH)

Ether was up about 2.6% as of 5:45 a.m. ET Tuesday.

Optimism Around Spot Ether ETFs

Spot bitcoin ETFs that began trading in January have fueled demand for bitcoin (BTC) and were partially responsible for sending bitcoin to record-highs in March.

Spot ether ETFs are likely to see around 20% to 25% of the flows spot bitcoin ETFs saw in their first few months of existence, Bloomberg Intelligence analyst James Seyffart previously told Investopedia.

Ether ETFs could drive ether prices to a record above $5,000, Bitwise Chief Investment Officer Matt Hougan, wrote in recent commentary. Hougan has predicted that the new ETFs will garner up to $15 billion in new assets over 18 months.

Questions Around Staking Remain

The Ethereum blockchain works on a proof-of-stake consensus mechanism for its operations such as reconciling and recording transactions on the network.

Unlike the proof-of-work mechanism followed by the Bitcoin network where millions of nodes compete for rewards from being the first to verify blocks, Ethereum relies on staking. Staking is a process by which ether holders pledge their crypto tokens to 'validators' who then participate in the transaction verification. The ether owners earn a reward in exchange for locking up their tokens.

The SEC has in the past raised the question whether ether is a security under its purview, though it has not expressly classified it as one. The Commodity Futures Trading Commission (CFTC) classifies both bitcoin and ether as commodities.

The reason this classification matters: The SEC in the past has also considered staking as a securities offering. The SEC recently sued blockchain technology firm Consensys for offering access to staked ether via their MetaMask wallet.

That's probably why for now, none of the spot Ether ETFs will be able to stake the ether they hold, even at the expense of higher returns for investors.

"I think certainly something like staking, or any feature of the product—we saw that on the bitcoin exchange traded products too, there were features of the product that some people would have liked to see included but weren't, those are always open for reconsideration as far as I'm concerned, SEC Commissioner Hester Peirce told Coinage media in a interview.

UPDATE—This story has been updated following SEC approval of the Grayscale Ethereum Trust and Grayscale Ethereum Mini Trust.

Correction, July 23, 2024—This story has been corrected to reflect the accurate date that spot ether ETFs begin trading.