BlackRock Challenges SEC Distinction for Crypto Futures and Spot ETFs
- BlackRock said that the SEC has no logical justification to differentiate between BTC spot and futures ETFs.
- The SEC claims that crypto futures ETFs have superior regulation and consumer protections under the 1940 Act.
- The 1940 Act lacks relevance in this area, as it places “certain restrictions on ETFs and ETF sponsors,” it said.
- BlackRock filed for an Ether spot ETF called the “iShares Ethereum Trust” on November 9.
BlackRock, the world’s largest asset management firm with around $9.4 trillion in assets under management, has stated that the United States Securities and Exchange Commission (SEC) has no grounds to differentiate between Bitcoin spot exchange-traded fund (ETF) and BTC futures ETFs. The regulator has no valid reason for the rejection of spot ETF applications, the firm said.
The leading asset management firm submitted its plan for a spot-Ether (ETH) ETF called the “iShares Ethereum Trust” on November 9, resulting in a surge in the price of ETH. Nasdaq submitted the 19b-4 application form to the SEC on behalf of BlackRock, and in its application, the firm questioned the regulator’s treatment of Bitcoin spot ETFs.
BlackRock claims that the SEC has used baseless logic to draw a line between Bitcoin spot ETFs and Bitcoin futures ETFs, approving the latter and rejecting multiple applications of the former.
“Given that the Commission has approved ETFs that offer exposure to ETH futures, which themselves are priced based on the underlying spot ETH market, the Sponsor believes that the Commission must also approve ETPs that offer exposure to spot ETH,” said the asset management firm.
It is important to note that the SEC has not approved a single Bitcoin spot ETF despite receiving a dozen applications for the same from leading asset management firms. However, the agency has approved Bitcoin futures ETFs, claiming that they have superior regulation and consumer protections under the 1940 Act as opposed to the 1933 Act, which covers spot-crypto ETFs.
Further, it seems that the SEC also favors regulation and surveillance-sharing agreements over the Chicago Mercantile Exchange’s (CME’s) digital asset futures market. Interestingly, BlackRock claims that the SEC’s preference for the 1940 Act lacks relevance in this area, as it places “certain restrictions on ETFs and ETF sponsors” and not the underlying assets of the ETFs.
The regulator said that “none of these restrictions address an ETF’s underlying assets, whether ETH futures or spot ETH, or the markets from which such assets’ pricing is derived, whether the CME ETH futures market or spot ETH markets,” while adding:
“As a result, the Sponsor believes that the distinction between registration of ETH futures ETFs under the 1940 Act and the registration of spot ETH ETPs under the 1933 Act is one without a difference in the context of ETH-based ETP proposals.”
BlackRock also noted that by approving Bitcoin futures ETFs via CME, the SEC “clearly determined that CME surveillance can detect spot-market fraud that would affect spot ETPs.”
As reported earlier by Bitnation, BlackRock CEO Larry Fink revealed that the asset management firm had invested $24 million in the now bankrupt crypto exchange FTX.