ETFs are not exactly the most exhilarating class of assets. They’re the safe type of investment that your dad or financial planner tells you to load up on—why bet on individual stocks when you can just own a slice of an entire sector, or even better, the S&P 500? For the topsy-turvy world of crypto, however, ETFs have been the most jolting spark of life since the NFT craze of 2021.
As a brief recap, the crypto industry has been trying to trojan horse Bitcoin into traditional finance through ETFs since 2013, when the Winklevoss twins of Social Network fame first applied with the SEC to create an exchange-tradeable asset that would hold and track underlying Bitcoin. They were rejected, as was every other applicant, until last year, when the crypto firm Grayscale won a crucial court case in favor of the product. The SEC finally relented in January, sending crypto prices soaring. The initial class of 11 Bitcoin ETFs was among the most successful of all time, with BlackRock and Fidelity’s offerings leading the charge. (The Winklevii never got their ETF, though their firm Gemini is serving as a custodian for one.)
Always nipping at Bitcoin’s heels, Ethereum—the second-largest cryptocurrency—seemed like the natural next candidate. The success of Bitcoin had already signaled a new era of crypto, where massive investment managers like hedge funds could comfortably dip their toes into the sector. An ETF for Ethereum would cement crypto’s status as a bona fide asset class accepted, or even subsumed, by traditional finance.
For months, the dream seemed impossible. Unlike Bitcoin, which U.S. regulators have long conceded is a commodity, the twin agencies of the SEC and CFTC have tussled over whether Ethereum should be regulated as a commodity or a security. The SEC, under the controversial chair Gary Gensler, has made a number of sorties in the past weeks indicating he would claim Ethereum to be a security and under his severe remit. An ETF of an unregistered security, of course, would be impossible.
Every prospective issuer I spoke with was convinced that the Ethereum ETF would be rejected. In April, I interviewed Jan Van Eck, the head of his eponymous firm, who told me the lack of engagement from the SEC meant they were likely to halt any progress. The question was not when an approval would eventually come, but who would advance the inevitable lawsuit challenging the rejection—as Grayscale once did with the Bitcoin ETF—to force the SEC’s hand.
Some were still optimistic. Two weeks ago, I caught up with Dave LaValle, the global head of ETFs for Grayscale, who told me he wasn’t giving up hope. Even when I pressed on whether Grayscale would be willing to lead the charge of litigation once again, he said that we should wait first for a decision. “I quit my day job of predicting what the SEC is going to do," he told me.
LaValle ended up being right. As quickly as a memecoin goes to zero, the SEC seemed to change its mind right before its deadline for a decision, engaging with both the issuers and the exchanges that would list the products on crucial forms. Some speculated that the 180 came because of a series of political victories for the crypto industry in Congress, including the House approving a sweeping regulatory bill with bipartisan support. Regardless of the reason, the SEC approved all eight applications on Thursday. While there are still some last hurdles, trading is expected to begin in the coming weeks.
The victory caps off a remarkable year for crypto, which has seen the industry rebound from the Sam Bankman-Fried trial to all-time highs buoyed by the launch of an inarguably—and uncharacteristically—
boring investment vehicle. Don’t be surprised if a Dogecoin ETF comes next.
Leo Schwartz
Twitter: @leomschwartz
Email: leo.schwartz@fortune.com
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