Ark 21Shares Joins Spot Ether ETF Race as Crypto Industry Ramps Up Pressure on SEC After Grayscale’s Legal Win

Updated: 07 September 2023

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Cathie Wood’s Ark Invest and 21Shares entered the race to launch a spot Ethereum ETF, ramping up pressure on the Securities and Exchange Commission (SEC) after it lost a legal showdown last week.

Ark 21Shares applied to launch an Ethereum ETF with the SEC on Aug. 6, joining VanEck in the race to be the first to launch the product in the US. The Chicago Board Options Exchange’s BZX exchange also filed 19b-4 documents to list the two spot Ether ETFs, giving the SEC up to 240 days to make a decision.

Cboe’s BZX exchange has filed with Ark 21Shares and VanEck to launch the first U.S. spot Ethereum ETF. The SEC will have 240 days after confirmation of the application to make a decision. Coinbase will serve as a monitoring sharing partner and custodian. https://t.co/I5HGQmSryf

— Wu Blockchain (@WuBlockchain) September 6, 2023

The applications follow a landmark legal victory for Grayscale last week, when a court called the SEC’s decision to approve Bitcoin futures ETFs, but not spot Bitcoin ETFs, “arbitrary and capricious.’’

The court also agreed with Grayscale that spot Bitcoin ETFs are “materially similar’’ to Bitcoin futures ETFs already approved by the SEC. The assets underlying a spot Bitcoin ETF are highly correlated with those underlying a spot Bitcoin futures ETF, it said.

Spot Bitcoin ETF Approval ‘Inevitable’

Crypto assets soared on the news and it prompted JPMorgan to say approval of a spot Bitcoin ETF is more likely. Former SEC chair Jay Clayton says approval is ‘’inevitable.’’

“There’s been so much regulatory controversy about a Bitcoin spot ETF that I guess many people thought it was a step too far – but we don’t,’’ Cathie Wood told Bloomberg. “And it’s always nice to be first.’’

Still, the SEC last week again delayed a decision on the applications for seven spot Bitcoin ETFs from firms including BlackRock and Fidelity, sending crypto assets into a tailspin.

The application by Ark 21Shares yesterday and VanEck’s July filing are the first attempts to list a spot Ether ETF. Ether is the second-largest cryptocurrency by market capitalization after Bitcoin.

Coinbase Custody would be the custodian for both spot Ether ETFs while Ark 21 Shares proposes a surveillance mechanism with Coinbase similar to that included for their spot Bitcoin ETF application.

Grayscale on Sept. 5 told the SEC that “there are no grounds’’ for not allowing the conversion of its Grayscale Bitcoin Trust into a spot Bitcoin ETF and warned that the delay is inflicting ‘’unjustified harm’’ on investors.

Approval of a spot crypto ETF backed by blue chip firms like Ark Invest, BlackRock or Fidelity would be a huge boost for the crypto ecosystem, helping it gain mainstream acceptance.

New York Digital Investment Group (NYDIG) has predicted that the approval of Spot Bitcoin ETFs could result in an influx of $30 billion in new demand for Bitcoin.

Approval of spot Bitcoin exchange-traded funds (ETFS) will trigger ‘enormous inflows,’ research frim K33 said in a Sept. 5 report, adding that it’s reckless of investors not to `aggressively accumulate” Bitcoin at current prices.