Key Takeaways:
- Kelly ETFs filed for developing an Ethereum ETF on Monday under the Investment Company Act of 1940, which means it could go live on Feb. 12 next year if regulators don’t delay it.
- The fund would seek to purchase CME near-month ethereum contracts.
The Kelly Ethereum Ether Strategy ETF fund, according to the application, will invest in ETH futures on regulated platforms in the United States. The Securities Act of 1933 and the Investment Company Act of 1940 are both followed by the application. In addition, only Ether futures traded on the Chicago Mercantile Exchange (CME) now meet all of the criteria.
The Kelly Ethereum Ether Strategy ETF will invest in cash-settled Ether futures contracts offered on licensed commodity exchanges. Futures contracts are valued concerning the underlying reference asset, which in this case is ether. “Cash-settled” indicates that if the ether price rises above the futures contract price before the contract ends, the buyer pays the seller the difference in cash.
The new Ethereum ETF is comparable to the BTC futures funds that have previously been approved.
Kelly Intelligence’s interest in ether is predicated on the fact that we are starting the fourth industrial revolution or the “intelligence revolution.” Moreover, the firm’s founder and CEO, Kevin Kelly, stated that “The Ethereum network will be an integral part of our lives going forward.”
The US Securities and Exchange Commission is presently considering only one application for ETH futures (SEC). It has 75 days to be considered by the regulator. The SEC, on the other hand, may decide to postpone or even reject the application.
Currently, the Chicago Mercantile Exchange (CME) is the only market where ether futures can be exchanged. The CME’s current ether futures contract position limits are 8,000 contracts per month, with each contract representing 50 ether. If the Kelly fund reaches certain thresholds, it will invest in longer-dated ether contracts and extra cash and fixed-income instruments such as government bonds and corporate debt securities such as short-term promissory notes.
According to Eric Balchunas, senior ETF analyst at Bloomberg, Kelly has only a 20% chance of receiving clearance, who doubts the SEC is ready for this new move. SEC Chairman Gary Gensler, according to Balchunas, is “not mentally ready” to approve anything other than a Bitcoin (BTC) futures ETF.
“During the Bitcoin futures filing process in August, VanEck and ProShares filed for Ether ETFs too. SEC told them to withdraw them. So it’s now three months (and three successful Bitcoin ETF futures ETF launches) later,” Balchunas said.
VanEck and ProShares abruptly withdrew their applications for futures-based ether ETFs in August, implying that the Securities and Exchange Commission, which supervises ETFs, had objected.
Last month, the SEC approved two bitcoin futures-based ETFs from ProShares and Valkyrie after Chair Gary Gensler concluded the products provided adequate investor protections.
