The U.S. Securities and Exchange Commission (SEC) made a landmark decision on May 23, 2024, by approving eight Ethereum (ETH) exchange-traded funds (ETFs) for listing and trading on regulated exchanges. This move follows the earlier greenlighting of Bitcoin (BTC) ETFs in January 2024 and marks a pivotal shift in how digital assets are being integrated into traditional finance. The approval signals growing regulatory clarity and opens new doors for institutional and retail investors seeking exposure to Ethereum through familiar financial vehicles.
Unlike the prolonged legal battles that preceded Bitcoin ETF approvals—most notably Grayscale Investments v. SEC, where courts ruled the SEC’s denial was “arbitrary and capricious”—this time, the commission approved Ethereum ETF applications voluntarily. This shift suggests a move away from “regulation by enforcement” toward a more constructive regulatory posture, one that supports innovation while maintaining investor protections.
Understanding the SEC’s Ethereum ETF Approval
The SEC authorized the following eight ETH ETFs:
- Grayscale Ethereum Trust
- Bitwise Ethereum ETF
- iShares Ethereum Trust
- VanEck Ethereum Trust
- ARK 21Shares Ethereum ETF (now rebranded as 21Shares Core Ethereum ETF following ARK Invest’s exit from the partnership)
- Invesco Galaxy Ethereum ETF
- Fidelity Ethereum Fund
- Franklin Ethereum ETF
These sponsors are well-established players from the first wave of BTC ETF launches, lending credibility and institutional trust to the new offerings.
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Critically, the SEC’s approval framework strongly implies that Ethereum is treated as a commodity, not a security. The ETFs were approved under rules governing commodity-based trust shares, and notably, none of the sponsors filed under the Investment Company Act of 1940—required for securities-based funds. The SEC also relied exclusively on legal precedents involving commodities, further reinforcing this classification.
Supporting its decision, the SEC cited the strong price correlation between spot ETH markets and the Chicago Mercantile Exchange (CME) ETH futures contracts. This linkage enables effective market surveillance, helping deter manipulation and ensuring pricing integrity for ETF shares.
However, the approval comes with a key restriction: staking of ETH through these ETFs is currently prohibited. Sponsors must submit a separate rule change proposal to the SEC if they wish to offer staking features—a process likely to face scrutiny given ongoing debates over whether staking constitutes an investment contract (i.e., a security).
What to Expect in the Coming Months
While approval was granted in late May 2024, actual trading is unlikely to begin before mid-to-late July 2024. Each sponsor must first file an S-1 registration statement with the SEC. Recent reports indicate that the SEC has returned initial filings with minor comments, requiring resubmission by July 8, 2024—delaying the launch timeline.
Bloomberg analyst Eric Balchunas initially projected a June launch window but has since revised his forecast due to regulatory feedback. Once live, expect fierce competition among issuers for market share. Early movers typically dominate ETF markets by securing inflows quickly, but long-term success may hinge on factors like:
- Fee structures and expense ratios
- Brand reputation and investor trust
- Commitment to crypto innovation
- Technological infrastructure
Since ETH ETFs are single-asset products, analytical depth or active management will play less of a role compared to traditional multi-asset funds.
Will Staking Be Allowed in the Future?
The prohibition on staking remains one of the most debated aspects of the approval. Staking currently yields an average annual return of around 2.61%, representing a missed income opportunity for investors. Allowing staking could significantly enhance fund attractiveness.
However, SEC Chairman Gary Gensler has previously suggested that staking mechanisms might fall under securities laws, framing them as investment contracts. If a sponsor submits a rule change to enable staking, it could trigger renewed regulatory debate—or even litigation.
The recently passed Financial Innovation and Technology for the 21st Century Act (FIT21) in the House of Representatives aims to clarify that Ethereum and similar assets are commodities, potentially resolving jurisdictional ambiguities. However, its fate in the Senate remains uncertain.
“The approval of Ethereum ETFs reflects evolving regulatory maturity—but the path forward isn’t without hurdles.”
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Broader Implications for the Crypto Industry
This approval sets a precedent beyond just Ethereum. It reinforces the idea that certain crypto assets can transition from potential securities to recognized commodities over time—especially as networks become decentralized. Founders of other blockchain projects may now have greater confidence that their assets can achieve similar status if sufficiently decentralized.
While the SEC continues to view most digital assets as securities, its approval of both BTC and ETH ETFs suggests a nuanced, case-by-case approach is emerging. This opens the door for future applications—possibly for Solana, Cardano, or Polkadot—though no such filings are imminent.
Moreover, integrating ETH into IRAs, 401(k)s, and brokerage accounts via ETFs will accelerate mainstream adoption. For millions of Americans, owning crypto through tax-advantaged or retirement accounts becomes far more accessible—and safer—than self-custodying digital wallets.
Frequently Asked Questions
Q: Does the SEC officially classify Ethereum as a commodity?
A: While not explicitly stated, the SEC’s approval under commodity rules strongly implies that ETH is being treated as a commodity for regulatory purposes.
Q: Can I earn staking rewards through these new ETH ETFs?
A: Not currently. The SEC has prohibited staking within these funds. Any future staking features would require additional regulatory approval.
Q: When will Ethereum ETFs start trading?
A: Likely in mid-to-late July 2024, pending final SEC review of updated S-1 filings from sponsors.
Q: Why did the SEC approve ETH ETFs more smoothly than BTC ETFs?
A: The approval avoided litigation because sponsors presented robust market surveillance agreements and relied on CME futures data—addressing prior concerns about manipulation.
Q: Could other cryptocurrencies get ETF approval soon?
A: Possible—but not immediate. The SEC’s focus will likely remain on BTC and ETH for now. Future approvals depend on decentralization, liquidity, and regulatory readiness.
Q: Are ETH ETFs safe for retirement accounts?
A: Yes. Once listed, they can be held in IRAs and 401(k)s through approved brokers, offering regulated exposure without custody risks.
Final Thoughts
The SEC’s approval of Ethereum ETFs is more than just a regulatory milestone—it’s a signal that digital assets are becoming embedded in mainstream finance. It validates years of advocacy by industry leaders and reflects growing recognition of blockchain’s transformative potential.
Yet challenges remain—particularly around staking rights and long-term regulatory consistency. Sponsors, investors, and advisors must proceed with caution, relying on experienced legal counsel and robust compliance frameworks.
As the market evolves, platforms that combine innovation with compliance will lead the next phase of growth.
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