The SEC’s surprise blessing for Ethereum ETFs is the crypto makeover no one expected

ETFs aren’t exactly the most exciting asset class. This is the type of safe investment your dad or financial planner tells you to stock up on: why bet on individual stocks when you can just own a slice of an entire sector, or even better, the S&P 500? However, for the upside-down world of crypto, ETFs have been the most life-altering spark since the NFT craze of 2021.

As a quick recap, the crypto industry has been trying to bring the Bitcoin Trojan horse into mainstream finance via ETFs since 2013, when the social media-famous Winklevoss twins emerged. applied with the SEC to create an exchange-traded asset that would hold and track the underlying Bitcoin. They were rejected, like all other candidates, until last year, when crypto company Grayscale won a crucial court case in favor of the product. The SEC finally ceded in January, sending crypto prices skyrocketing. The initial class of 11 Bitcoin ETFs were among the most successful ever, featuring BlackRock and loyaltyOffers are leading the charge. (The Winklevii never got their ETF, although their company Gemini is the custodian.)

Still hot on Bitcoin’s heels, Ethereum, the second-largest cryptocurrency, seemed like the next natural candidate. The success of Bitcoin had already signaled a new era of crypto, where massive investment managers like hedge funds could comfortably dip your toes in the area. An ETF for Ethereum would solidify crypto’s status as a true asset class accepted, even integrated, by traditional finance.

For months, the dream seemed impossible. Unlike Bitcoin, which U.S. regulators have long recognized as a commodity, the twin agencies of the SEC and CFTC have argued over whether Ethereum should be regulated as a commodity or a security. The SEC, under the controversial presidency Gary Genslerhas do a number of releases in recent weeks indicate that he would claim that Ethereum is a security and falls within his harsh remit. An ETF on an unregistered security would of course be impossible.

Every potential issuer I spoke with was convinced that the Ethereum ETF would be rejected. In April, I interviewed Jan Van Eck, the head of his eponymous firm, who told me that the SEC’s lack of commitment meant it risked stopping any progress. The question was not when an approval would eventually come, but who would advance the inevitable lawsuit challenging the rejection — as Grayscale once did with the Bitcoin ETF — to force the SEC’s hand.

Some were still optimistic. Two weeks ago, I met with Dave LaValle, global head of ETFs for Grayscale, who told me he wasn’t giving up hope. Even when I pressed whether Grayscale would be willing to lead the litigation charge again, he responded that we would have to wait for a decision first. “I quit my day job of predicting what the SEC is going to do,” he told me.

LaValle ended up being right. As soon as a memecoin hits zero, the SEC appeared to change its mind just before the deadline to make a decision, engaging with both issuers and exchanges that would list the products on crucial forms. A few speculated that the 180 came about because of a series of crypto industry policy victories in Congress, including House approval of a broad regulatory bill with bipartisan support. Whatever the reason, the SEC approved all eight requests on Thursday. Even if there are still a few last obstaclestrading is expected to begin in the coming weeks.

The win caps a remarkable year for crypto, which saw the industry bounce back from Sam Bankman-Fried. trial to unprecedented heights, supported by the launch of an undeniably – and unusual – program

Boring investment vehicle. Don’t be surprised if a Dogecoin The ETF comes next.

Leo Schwartz
Twitter: @leomschwartz
E-mail: leo.schwartz@fortune.com
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PRIVATE-HORSE RIDING

– Medical Learning Groupsupported by DW Health Partnersacquired Health Talem, an accredited medical education provider based in Trumbull, Connecticut. Financial terms were not revealed.

EXITS

– Hg agreed to acquire Audit commissiona Los Angeles, CA-based risk management platform for audit, risk, compliance and ESG management, with over $3 billion in Battery companies.

– Tinicum acquired KGMa Tulsa, Oklahoma-based supplier of natural gas products to Compass Group Equity Partners. Financial terms were not revealed.

IPOS

– Activate therapya Fort Worth, Texas-based developer of cancer therapeutics has filed for an IPO on Nasdaq. Bios Equity And Kairos Adventure support the business.

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