In January, ARK Invest teamed up with 21Shares to offer a spot bitcoin ETF, which trades as ARKB. The ETF has been hugely successful, attracting several billion dollars in investment. However, the duo is not content with just a spot in a bitcoin ETF. They have also applied for a spot in ethereum ETF, which is currently under review by the SEC.
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Though they did not make a formal comment, ARK and 21Shares updated their filing for the spot ethereum ETF application. The update removed a small clause related to staking. Originally, the firms were looking to stake ETH that was held by the firms, which would have been labeled as income from the fund. "Sponsor may, from time to time, stake a portion of the Trust's assets through one or more trusted Staking Providers," the clause noted.
However, the update excluded this clause. While they did keep all of the other clauses specific to ethereum, the change caused some to raise eyebrows. Eric Balchunas is an ETF analyst for Bloomberg and in a post on X, he said, "While it may seem like this is them getting their docs in shape based on SEC comments (which would be good news) there hasn't been any comments. So it’s prob either a Hail Mary or maybe trying to give SEC one less thing to use in their rejection. Not sure (yet)."
According to Balchunas, the SEC did not prompt ARK and 21Shares to make the change. So, in his opinion, it is some sort of preemptive action to give their application a higher probability of acceptance.
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The issue of staking has been seen by some as a hang-up for potential approval of spot ethereum ETFs. The novelty of the system could cause further delays in the already lengthy decision-making process by the SEC. So, by leaving it out of the application, ARK could improve its chances of approval. However, this does come at the cost of having a less attractive ETF, as the staking rewards would not be earned.
The SEC has already made delays to decisions on multiple applications. As it stands, the final date for a decision on the VanEck ETH ETF application is May 23, followed by ARK 21Shares' on May 24th.
"Our odds of approval remain the same: slim to none," Balchunas said in a post on X.
Cathie Wood is the CEO of ARK Invest and is known to be extremely bullish on cryptocurrency. However, even she acknowledged that the crypto ETF market may not see much more growth. "We'd be surprised to see anything but bitcoin and ether being approved by the [U.S. Securities and Exchange Commission]," she said in an interview.
The case for a spot ethereum ETF is getting weaker, and the SEC has not spoken often on the topic. While there is certainly a possibility that the ETFs could receive approval in late 2024 or 2025, it seems unlikely that they will occur anytime soon.
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