A Review of 7 Ethereum Futures ETF Filing Companies

7 Ethereum Futures ETF Filing Companies Review

Source: Decrypt; Compiled by: LianGuai BitpushNews Mary Liu

Recently, the heat surrounding spot Bitcoin exchange-traded funds (ETFs) has cooled down, and issuers and investors are still waiting for approval from US regulatory agencies. However, Ethereum futures ETF filings are emerging like mushrooms after rain.

According to public documents, seven companies have already submitted applications for Ethereum ETFs. Tracking Ethereum futures essentially means investing in futures contracts of the industry’s second-largest cryptocurrency, which are traded on the Chicago Mercantile Exchange (CME) regulated by the Commodity Futures Trading Commission (CFTC), rather than directly holding the underlying assets.

Whether these filings will be rejected and whether the SEC will approve them remains uncertain, especially considering the recent crackdown on the cryptocurrency industry by regulatory agencies and the fact that the SEC classifies almost all cryptocurrencies (except Bitcoin) as securities.

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Volatility Shares: Ethereum Strategy ETF

Filing Date: 07/27/2023

SEC Response: 10/11/2023

Listing Exchange: CBOE BZX Exchange

Volatility Shares manages four exchange-traded funds worth $173.5 million. After outlining its plans in the filing submitted to the SEC on July 28th, the company may become the first issuer focused on Ethereum ETFs.

The proposed Ethereum Strategy ETF (ETHU) complies with the provisions of the 1940 Investment Company Act regarding investment policies and capital structure. It will invest up to 25% of its assets in cash-settled Ethereum futures contracts traded on the CME regulated by the CFTC.

In addition, according to the filing, the fund may invest in reverse repurchase agreements and stocks of other investment companies, but not directly in Ethereum.

The fund plans to list on the CBOE BZX Exchange and primarily trade its shares.

The proposed ETHU application comes after the launch of the Volatility Shares 2x Bitcoin Strategy ETF (BITX), which is the first leveraged Bitcoin futures ETF launched by Mt. Kisco, New York-based company in June.

Bitwise: Ethereum Strategy ETF

Filing Date: August 1, 2023

SEC Response: October 16, 2023

Listing Exchange: NYSE Arca

After withdrawing the initial application in May, Bitwise refiled the Ethereum Strategy ETF (ETHG) on August 1st. According to the application, ETHG intends to invest in cash-settled, nearest-to-expiration, shortest-term ETH futures contracts without directly touching the current spot price of Ethereum.

According to the Investment Company Act of 1940, the fund is classified as a “non-diversified” fund, which means it can invest a higher proportion of assets in financial instruments of a single or a few counterparties.

The document details that the fund will not directly invest in ETH futures contracts; instead, investments will be made through a wholly-owned subsidiary operating under Cayman Islands law.

In addition, due to the intention of Bitwise Ethereum Strategy ETF to obtain the treatment of a regulated investment company, the investment scale of the fund in this fiscal year will not exceed 25% of its total assets at the end of each quarter.

Despite such a low allocation, the fund still primarily achieves its investment objectives through investments in ETH futures contracts, with the remaining 75% of assets expected to be invested in US Treasury bonds and other US government bonds, as well as money market funds, cash, and cash equivalents, such as high-quality commercial bills.

Roundhill: Roundhill Ethereum Strategy ETF

Filing Date: August 1, 2023

SEC Response: October 16, 2023

Listing Exchange: Not specified

Roundhill Investments, headquartered in New York, is a registered investment advisor focused on providing innovative financial products aimed at attracting the investment themes of the next generation of investors.

The company currently manages a total of $662 million in assets across eight ETFs and seeks to expand its product range by launching the Roundhill Ethereum Strategy ETF.

According to the filing submitted on August 1, the Roundhill Ethereum Strategy ETF is an actively managed fund that seeks capital appreciation by investing in near-month Ethereum futures contracts listed on the CME.

Similar to Bitwise, the fund plans to invest up to 25% of its assets in a wholly-owned subsidiary formed under the laws of the Cayman Islands.

VanEck: VanEck Ethereum Strategy ETF

Filing Date: August 1, 2023

SEC Response: October 16, 2023

Listing Exchange: Not specified

VanEck is also one of the hopefuls for a spot Bitcoin ETF and seems to be heavily investing in Ethereum: according to the filing on August 1, the VanEck Ethereum Strategy ETF plans to invest approximately 100% of its total assets in ETH.

If the fund is unable to achieve its target exposure due to position limits or liquidity constraints, it may invest in equity securities of ETH-related companies that the fund advisor believes provide a return that typically corresponds to or is closely related to the performance of ETH or ETH futures.

The document states, “For example, the fund may invest in US-listed companies that provide digital asset trading platforms.”

In addition to ETH futures, the VanEck Ethereum Strategy ETF is expected to hold a “significant amount” of cash and fixed income investments, which are intended to provide liquidity and serve as collateral for the fund’s ETH futures, and participate in “active and frequent trading” of the investment portfolio.

Proshares: Inverse Ethereum Strategy ETF and ProShares Ethereum Strategy ETF

Submission Date: August 1, 2023

SEC Response: October 16, 2023

Listed Exchange: Not specified

On August 1st, ETF issuer ProShares applied for two different Ethereum-focused ETFs: ProShares Short Ethereum Strategy ETF and ProShares Ethereum Strategy ETF.

The former seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the S&P CME Ethereum Futures Index, while the latter primarily aims to provide capital appreciation by managing the exposure to listed Ethereum futures contracts on CME. The investment objective is “non-fundamental,” which means that the board can make changes to it without the approval of the fund shareholders.

Similar to Bitwise Ethereum Strategy ETF, ProShares’ Ethereum Futures ETFs also seek to qualify as regulated investment companies, which means that the fund’s investment in its respective subsidiaries (also located in the Cayman Islands) will not exceed 25% of total assets at the end of each fiscal quarter.

Grayscale: Grayscale Ethereum Futures ETF

Submission Date: August 1, 2023

SEC Response: October 16, 2023

Listed Exchange: Not specified

On May 9th, Grayscale Investments announced the establishment of Grayscale Funds Trust, a Delaware statutory trust structure, which includes three new funds: Grayscale Ethereum Futures ETF, Grayscale Global Bitcoin Composite ETF, and Grayscale Privacy ETF.

Just a week later, the company submitted an amended filing to the SEC, removing the mention of Ethereum Futures ETF, but reapplied for issuance on August 1st.

The updated filing states that the Ethereum Futures ETF is an actively managed fund that primarily achieves its investment objective through the purchase of Ethereum futures contracts by a subsidiary located in the Cayman Islands.

The fund also plans to hold approximately 100% of net assets in Ethereum futures contracts, although it may also hold a significant amount of cash and cash equivalents investments such as U.S. Treasury securities or repurchase agreements.

Direxion: Bitcoin Ethereum Strategy ETF

Submission Date: August 2, 2023

SEC Response: October 17, 2023

Listed Exchange: Not specified

According to the U.S. Securities and Exchange Commission (SEC) filing, the proposed Direxion Bitcoin Ethereum Strategy ETF will invest in Bitcoin and Ethereum futures contracts, subject to regulatory approval. The ETF may also invest in other ETFs that have exposure to futures products.

Founded in 1997, Direxion has a reputation in the traditional financial ETF space, specializing in creating investment products for investors seeking opportunities beyond traditional offerings. Their products are index-based and provide directional choices, increased risk exposure, and rule-based long-term strategies. As of March 31, 2023, Direxion manages approximately $27.5 billion in assets.

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