Fidelity has updated its S-1 application with the SEC for its Ether exchange-traded fund (ETF), indicating that the underlying Ether tokens will not be staked. This amendment comes amid speculation about the SEC’s stance on spot Ether ETFs, with reports suggesting a shift possibly due to external pressures.
The upcoming deadline for VanEck’s Ether ETF proposal is on May 23, and while there’s increased optimism for approval, it’s important to note that both the 19b-4 form and S-1 filings need approval. Bloomberg ETF analyst James Seyffart suggests that S-1 approvals may take some time, possibly weeks to months, but if initial approvals are granted, it indicates a matter of “when” rather than “if” for the live Ether ETF.
Despite ETH ETF clearance, staked Ether could be considered as a securities
The SEC has already sought to classify Ether as a security, and Ethereum’s transition to proof-of-stake (PoS) may have provided the regulator another justification.
According to The Wall Street Journal, SEC Chair Gary Gensler stated at a 2022 Senate Banking Committee hearing that cryptocurrencies and intermediaries that allow holders to “stake” their crypto may be classified as securities under the Howey test.
Despite the U-turn on Ether ETFs, Galaxy Research’s head of research, Alex Thorn, believes the securities watchdog may still define staked Ether as a security. Thorn writes:
“If the reports about the SEC’s change in stance regarding Ethereum ETFs are accurate, it’s likely they’ll aim to differentiate between regular ETH, which they may not consider a security, and staked ETH, which they might view differently, possibly as a security.”
Fidelity initially submitted its S-1 application to the SEC on March 27, outlining its intention to stake a portion of the fund’s ETH. The original filing highlighted the additional risks associated with staking, such as the potential for loss through slashing penalties and liquidity concerns during the staking process. Furthermore, staking rewards would be categorized as income for the fund, leading to taxable events for investors without corresponding distributions from the Trust.
May 2024, Cryptoniteuae
