The biggest asset management firm in the world is challenging the U.S. Securities and Exchange Commission (SEC), contending that spot market Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) are no different than futures ETFs.
In a new filing, investment titan BlackRock – which has over $8 trillion in assets under management – says that the regulatory agency should approve spot market crypto ETFs as it has already greenlighted futures ETFs.
“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 (BlackRock) believes that the Commission must also approve ETPs (exchange-traded products) that offer exposure to spot ETH, like the Trust.”
According to BlackRock, the SEC is misusing the Investment Company Act of 1940 by applying it to spot ETFs.
“While the 1940 Act has certain added investor protections that the 1933 Act does not require, these protections do not seek to allay harms arising from underlying assets or markets of assets that ETFs hold, such as the potential for fraud or manipulation in such markets.
In other words, the Sponsor does not believe that the application of the 1940 Act supports the purported justifications the Commission has made in denying other spot digital asset ETPs.
The 1940 Act explicitly lists out the types of abuses it seeks to prevent, and places certain restrictions related to accounting, borrowing, custody, fees, and independent boards, among others.
Notably, 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.”
BlackRock concludes that the distinction created by the SEC between futures ETFs and spot market ETFs is arbitrary.
“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.”
Last week, BlackRock registered its iShares Ethereum trust in the state of Delaware, a move similar to the firm’s registration of its Bitcoin trust.
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