Key Takeaways
- The companies argued that by failing to abide by the first-to-file principle,the SEC had diminished healthy competition and hindered financial innovation.
- The letter argued that the shift in process “incentivizes replication rather than original innovation.”
Three leading asset managers, VanEck, 21Shares, and Canary Capital, have written a letter to the United States Securities and Exchange Commission (SEC), asking the regulatory watchdog to reinstate the “first-to-file, first-to-approve” rule for exchange-traded products (ETFs).The “first-to-file” principle refers to approving ETF applications in the order they were submitted to the regulator.
The companies argued that by failing to abide by the first-to-file principle, the SEC had diminished healthy competition and hindered financial innovation. The letter reads:
“The reduced incentive for pioneering product development has broader implications. It diminishes investor choice, compromises market efficiency, and fundamentally undermines the commission’s mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
“Continued global leadership of the United States in financial innovation is deeply connected to regulatory frameworks that actively support and reward entrepreneurship, creativity, and genuine innovation,” the letter continues.
The letter, which was posted on VanEck’s official X account on June 6, criticized the SEC’s trend of approving multiple crypto ETFs all at once, instead of honoring the order in which applications were submitted. “When the Commission plays favourites, it costs ETP sponsors money and makes the ETP marketplace less fair,” the letter stated.
The companies pointed to the 2021 launch of the first Bitcoin futures ETF as an example. ProShares, which received approval slightly ahead of others, dominated with over 90% market share just days after its release.
The trio also referenced the January 10, 2024 approvals, when the SEC greenlit 11 spot Bitcoin ETFs at once.
The letter said that the shift in process “incentivizes replication rather than original innovation.”
The SEC also approved Ethereum ETFs the same way a few months after approving Bitcoin ETFs. VanEck and 21Shares were among the first to file for both Bitcoin and Ethereum spot products but were grouped with latecomers during final approval.
Digital asset ETF filings accelerated following the inauguration of US President Donald Trump, as asset managers and crypto companies rushed to gain approval for new investment vehicles in anticipation of a friendlier regulatory climate in the US.
Although institutional interest in altcoin and staking ETFs continues to grow and ETF filings continue to multiply, the SEC has delayed its decision on several altcoin and crypto-staking ETFs. In May, the regulator postponed its decision deadline on listing Grayscale’s spot Solana Trust ETF to October. SEC officials also delayed the approval of staking and XRP ETFs in May, a development that did not surprise analysts.
The plan to launch two new crypto ETFs tied to Solana and Ethereum has hit a roadblock after the SEC raised concerns that they are not fit for ETFs. On Friday, SEC reportedly sent a letter to RexShares, the company behind the ETFs, saying that the ETFs do not fit the legal definition of an “investment company,” a mandatory requirement for any ETF that wants to be traded on the stock market.
The SEC also said the registration forms may have been “improperly filed” and that some of the information shared could be “potentially misleading.”
