These Are the High-Profile Ethereum Futures ETF Applications Currently in Play

With issuers and investors still eagerly awaiting regulatory approval for Bitcoin exchange-traded funds (ETFs) in the U.S., attention has turned to Ethereum futures ETFs.

At least five applications from different firms were filed within 24 hours on August 1, and another was submitted last week.

An ETF tracking Ethereum futures would essentially invest in futures contracts of the industry’s second-largest cryptocurrency that are traded on the CFTC-regulated Chicago Mercantile Exchange (CME) rather than directly holding the underlying asset.

How these efforts pan out and whether the U.S. Securities and Exchange Commission (SEC) greenlights any of the current filings remains an open question, especially in the light of the regulator’s recent clampdown on the crypto industry and its barely disguised attempts to classify almost every cryptocurrency—except for Bitcoin—as a security.

Yet, as Bloomberg’s senior ETF analyst Eric Balchunas noted on August 10, in the past the SEC has told Ethereum futures ETF hopefuls to withdraw their filings 5-6 days after the first filing hit.

“We are now on Day 13 and no withdrawals. Not home free yet but very good sign. As we predicted these will likely hit market in mid-October,” wrote Balchunas.

Volatility Shares: Ether Strategy ETF

Filed: 07/27/2023
SEC Response: 10/11/2023
Listing Exchange: CBOE BZX Exchange

Volatility Shares, which manages $173.5 million across four exchange-traded funds, could become the first issuer of the ETF with a focus on Ether after outlining its plans in a July 28 filing with the SEC.

The company’s proposed Ether Strategy ETF (ETHU) complies with the provisions of the 1940 Act governing investment policies and capital structure and would invest up to 25% of its assets in cash-settled Ether futures contracts traded on the CFTC-regulated Chicago Mercantile Exchange (CME).

Additionally, the fund may invest in reverse purchase agreements and shares of other investment companies, but not directly in Ethereum, per the filing.

The fund intends to list and principally trade its shares on CBOE BZX Exchange.

The proposed ETHU application follows the introduction of the Volatility Shares 2x Bitcoin Strategy ETF (BITX)—the first leveraged Bitcoin futures ETF—launched by the Mt. Kisco, NY-based firm in June.

Bitwise: Ethereum Strategy ETF

Filed: 08/01/2023
SEC Response: 10/16/2023
Listing Exchange: NYSE Arca

After withdrawing its initial filing in May, Bitwise re-applied for its Ethereum Strategy ETF (ETHG) on August 1. According to the filing, ETHG intends to invest in cash-settled, front-month, i.e. with the shortest time to maturity, ETH futures contracts, without seeking direct exposure to the current spot price of Ethereum.

The fund is classified as “non-diversified” under the Investment Company Act of 1940, meaning it is able to invest a relatively high percentage of its assets in financial instruments with a single counterparty or a few counterparties.

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

Furthermore, since the Bitwise Ethereum Strategy ETF intends to qualify for treatment as a regulated investment company, the size of the fund’s investment in that subsidiary will not exceed 25% of its total assets at each quarter end of the fiscal year.

Despite such a low allocation, the fund seeks to achieve its investment objective primarily through its investment in ETH Futures Contracts, whereas the remaining 75% of assets are expected to be invested in U.S. Treasuries and other U.S. government obligations, as well as money market funds, cash and cashlike equivalents such as high-quality commercial paper.

Roundhill: Roundhill Ether Strategy ETF

Filed: 08/01/2023
SEC Response: 10/16/2023
Listing Exchange: Not specified

New York-based Roundhill Investments is an SEC-registered investment adviser focused on offering innovative financial products designed to offer exposure to investment themes that appeal to the next generation of investors.

The firm currently has a total of $662 million of assets under management across eight ETFs and is seeking to expand the offering with the launch of the Roundhill Ether Strategy ETF.

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

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

VanEck: VanEck Ethereum Strategy ETF

Filed: 08/01/2023
SEC Response: 10/16/2023
Listing Exchange: Not specified

VanEck, which is also among the spot Bitcoin ETF hopefuls, appears to be going big on Ethereum: according to the August 1 filing, the total value of the ETH to which the VanEck Ethereum Strategy ETF is planning to have economic exposure is approximately 100% of its total assets.

If for any reason such as exceeded position limits or liquidity constraints, the fund is unable to achieve the target exposure, it may invest in equity securities of ETH-related companies, i.e. companies listed on a U.S. stock exchange that the fund’s adviser believes provide returns that generally correspond, or are closely related, to the performance of ETH or ETH futures.

“For example, the Fund may invest in U.S. listed companies offering digital asset trading platforms,” reads the filing

In addition to ETH futures, the VanEck Ethereum Strategy ETF expects to have “significant holdings” of cash and fixed-income investments, which are intended to provide liquidity and serve as collateral for the fund’s ETH futures, as well as to engage in “active and frequent trading of portfolio holdings.”

Proshares: Short Ether Strategy ETF and ProShares Ether Strategy ETF

Filed: 08/01/2023
SEC Response: 10/16/2023
Listing Exchange: Not specified

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

The former seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the S&P CME Ether Futures Index, whereas the latter seeks to provide capital appreciation primarily through managed exposure to CME-listed Ether futures contracts, with the investment objective being “non-fundamental,” meaning it may be altered by the Board of Trustees without the approval of the fund’s shareholders.

Similar to the Bitwise Ethereum Strategy ETF, both Proshares’ Ethereum futures ETF seeks to qualify as regulated investment companies, meaning that the size of the fund’s investment in their corresponding subsidiaries, which will also be based in the Cayman Islands, will not exceed 25% of the total assets at each quarter end of the fiscal year.

Grayscale Investments: Grayscale Ethereum Futures ETF

Filed: 08/01/2023
SEC Response: 10/16/2023
Listing Exchange: Not specified

On May 9, Grayscale Investments, best known as the sponsor of the troubled Grayscale Bitcoin Trust (GBTC), announced the formation of Grayscale Funds Trust—a Delaware statutory trust structure that encompasses three new funds: Grayscale Ethereum Futures ETF, Grayscale Global Bitcoin Composite ETF, and Grayscale Privacy ETF.

Just a week later, the firm submitted amendments to its SEC filing to remove mentions of the Ethereum Futures ETF though, only to re-apply for the offering on August 1.

The updated filing states that the Ethereum Futures ETF is an actively-managed fund that seeks to achieve its investment objective primarily through exposure to Ethereum futures contracts, purchased via a Cayman Islands-based subsidiary.

The fund is also planning to hold approximately 100% of its net assets in Ethereum futures contracts, however, it may also have significant holdings of cash and cash equivalent investments, such as U.S. Treasury Bills or repurchase agreements.

Direxion Bitcoin Ether Strategy ETF

Filed: 08/02/2023
SEC Response: 10/16/2023
Listing Exchange: NYSE Arca

ETF issuer Direxion joined the list of companies seeking to introduce Ethereum futures ETFs, after it filed its application for a combined Bitcoin and Ether Futures Fund on August 2.

According to the prospectus, the Fund aims to achieve its investment objective through managed exposure to a combination of Bitcoin futures contracts and Ether futures contracts traded on CME.

One notable item in Direxion’s filing is that the fund’s shares would be issued and redeemed only in large blocks called “Creation Units,” comprising 25,000 shares each.

There’s no minimum investment set for the fund, which may also invest in other ETFs with exposure to futures products.

Bitwise Bitcoin and Ether Market Weight ETF

Filed: 08/03/2023
SEC Response: 10/17/2023
Listing Exchange: Not specified

Bitwise followed with another filing on August 3, which includes applications for two dual Bitcoin and Ethereum futures-based products: Bitwise Bitcoin and Ether Market Weight ETF and Bitwise Bitcoin and Ether Equal Weight ETF.

The Market Weight fund’s strategy is to invest in either Bitcoin futures contracts or Ether futures contracts, with the allocation based on the relative market capitalization between the two cryptocurrencies and rebalanced each month.

Details for the latter are scarce, as the information in the prospectus is not complete and may be changed.

Again, the filing states the investments would be done through the company’s Cayman Islands-based subsidiary.

Proshares Bitcoin & Ether Strategy ETF Bitcoin

Filed: 08/02/2023
SEC Response: 10/16/2023
Listing Exchange: Not specified

Filed on August 2, ProShares’ dual Bitcoin & Ether Strategy ETF seeks investment results that track the performance of the S&P Cryptocurrency MegaCap CME Futures Index, with investments mostly targeting front-month crypto futures.

As is the case with the company’s Short Ether Strategy ETF and Ether Strategy ETF, the fund seeks to qualify as a regulated investment company, expecting to invest a portion of its assets (up to 25%) in a wholly-owned subsidiary organized under the laws of the Cayman Islands and advised by ProShare Advisors.

The filing also states that the Fund will issue and redeem shares only to authorized participants (typically broker-dealers) in exchange for cash in large blocks, known as Creation Units.

The fund’s shares may only be purchased and sold by retail investors in secondary market transactions through broker-dealers or other financial intermediaries

Proshares Bitcoin & Ether Equal Weight Strategy ETF

Filed: 08/03/2023
SEC Response: 10/17/2023
Listing Exchange: Not specified

ProShares’ fourth application in three days came on August 3, stating that the Bitcoin and Ether Equal Weight Strategy ETF “seeks investment results, before fees and expenses, that track the performance of the Bitcoin and Ether Equal Weight Index.”

“The Index measures the performance holding long positions in the nearest maturing monthly bitcoin and ether futures contracts,” reads the filing.

Similar to the three previous filings, ProShare’s Bitcoin and Ether Equal Weight Strategy ETF will have exposure to futures and generate qualifying income by investing up to 25% of its assets in front-month crypto futures through a Cayman Islands-based subsidiary.

Additionally, the fund may invest in shares of other ETFs, which are registered investment companies that are traded on stock exchanges and hold assets such as stocks or bonds.

The filing further states that any cash balances maintained in connection with its use of derivatives are expected to typically be held in high-quality, short-term money market instruments, such as U.S. Treasury Bills and Repurchase Agreements.

Kelly Ethereum Ether Strategy ETF (EX)

Filed: 08/04/2023
SEC Response: 10/18/2023
Listing Exchange: Not specified

Denver-based investment firm Kelly Strategic Management first filed for an Ethereum futures ETF back in November 2021; however, those plans were eventually shelved after none of the other similar products that landed on the SEC’s desk materialized.

According to an updated prospectus filed with the SEC on August 4, Kelly Ethereum Ether Strategy ETF (EX) is an actively managed ETF that seeks to achieve its investment objective by investing, under normal circumstances, in standardized, cash-settled Ether futures contracts  traded on CFTC-registered commodity exchanges ,as well as pooled investment vehicles and exchange-traded products that provide exposure to Ether.

As with the majority of the other Ether futures ETF hopefuls, the Fund will invest in futures contracts traded on the CME indirectly, via a wholly-owned subsidiary organized under the laws of the Cayman Islands. The latter complies with the provisions of the 1940 Act relating to affiliated transactions and custody.

Valkyrie Bitcoin and Ether Strategy ETF

Filed: 08/04/2023
SEC Response: 10/3/2023
Listing Exchange: Nasdaq

Financial services firm Valkyrie Digital Assets made a surprise move on August 4 when it submitted another update to its existing Valkyrie Bitcoin Strategy ETF, declaring its intention to convert it into a dual Bitcoin and Ethereum futures ETF that will primarily invest in front-month Bitcoin and Ether futures contracts through a Cayman Islands-based subsidiary.

“Notwithstanding anything to the contrary in the Fund’s Summary Prospectus, Prospectus or Statement of Additional Information, on or around October 3, 2023, the principal investment strategies of Valkyrie Bitcoin Strategy ETF will change to pursue its investment objective through managed exposure to a combination of bitcoin futures contracts and ether futures contracts,” read the filing’s definitive materials.

The fund’s name is also expected to change to Valkyrie Bitcoin and Ether Strategy ETF on or about October 3, however, it will keep the same ticker symbol “BTF” and is expected to continue to trade on the Nasdaq stock exchange.

Per the prospectus, in addition to its investments in Bitcoin and Ether futures contracts, the fund will also invest its remaining assets directly in cash, cash-like instruments or high-quality securities, including bills, notes and bonds issued by the U.S. Treasury, as well as money market funds and/or corporate debt securities.

The Valkyrie Bitcoin and Ether Strategy ETF is one of the few to state a management fee of 0.95%.

Bitwise Bitcoin and Ether Equal Weight Strategy ETF

Filed: 08/10/2023
SEC Response: 10/09/2023
Listing Exchange: NYSE Arca

On August 10, Bitwise filed an updated prospectus for its existing Bitcoin futures ETF, signaling its intention to turn the fund into an ETF centered on an equal-weight strategy for both Bitcoin and Ether, with the effective date set for October 9.

This means the firm now has as many as three applications for Ethereum-related ETFs.

As per its filing, Bitwise’s Bitcoin Strategy Optimum Roll ETF will be renamed to Bitcoin and Ether Equal Weight Strategy ETF, while also altering its ticker from BITF to BTOP.

This strategic shift mirrors a similar move made by Valkyrie, which also modified its Bitcoin Strategy ETF into a Bitcoin and Ether Strategy ETF. Notably, this change aligns with the trend of various companies filing for Ethereum-focused ETFs.

The Fund is a series of Bitwise Funds Trust and is regulated as an “investment company” under the 1940 Act, with investments—made through a Cayman Islands-based subsidiary—primarily going into front-month Bitcoin and Ether futures contracts traded on the CME and rebalanced each quarter.

The Bitwise Bitcoin and Ether Equal Weight Strategy ETF states a management fee of 0.85%.