The world’s largest asset management company is challenging the U.S. Securities and Exchange Commission (SEC), arguing that Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) in the spot market are no different than futures ETFs.
In a new filing, investment titan BlackRock – which has more than $8 trillion in assets under management – says the regulator should approve crypto ETFs in the spot market as it has already given the green light to futures ETFs.
“Given that the Commission has approved ETFs that provide exposure to ETH futures, which are themselves priced based on the underlying spot ETH market, the sponsor (BlackRock) believes that the Commission should also approve ETPs (on-exchange traded products) that provide exposure to spot ETH, such as the Trust.”
According to BlackRock, the SEC is abusing the Investment Company Act of 1940 by applying it to ETF spotting.
“Although the 1940 Act provides certain additional investor protections that the 1933 Act does not require, these protections are not intended to eliminate the harm arising from underlying assets or markets of assets that ETFs hold, such as the potential for fraud or manipulation on such markets.
In other words, Sponsor does not believe that application of the 1940 Act supports the purported justifications the Commission has made in denying other spot ETPs for digital assets.
The 1940 Act explicitly lists the types of abuse it seeks to prevent, and imposes certain restrictions on accounting, lending, custody, compensation and independent boards, among others.
Notably, none of these restrictions apply to the underlying assets of an ETF, whether ETH futures or spot ETH, or the markets from which the pricing of such assets is derived, whether the CME ETH futures market or the spot ETH markets.”
BlackRock concludes that the SEC’s distinction between futures ETFs and spot market ETFs is arbitrary.
“The Sponsor believes that the distinction between the registration of ETH futures ETFs under the 1940 Act and the registration of spot ETH ETPs under the 1933 Act is one without 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 company’s registration of its Bitcoin trust.
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