21Shares Revises Spot Ether ETF Proposal Amid SEC Review Delays

21Shares has made a significant revision to its proposal for a spot Ether exchange-traded fund (ETF), according to the latest filing with the Securities and Exchange Commission (SEC) on Friday, May 10. The amendment saw the removal of a clause that previously indicated the possibility of staking a portion of the ETF’s assets through third-party providers.

The initial filing on February 7 had stated that 21Shares expected to engage in staking activities and would classify any earnings from such activities as income for the fund. However, the updated document no longer includes this clause, although it still addresses potential risks such as slashing penalties, the temporary inaccessibility of funds during bonding and unbonding periods, and the impact these factors could have on Ether’s price.

Eric Balchunas, a Bloomberg ETF analyst, suggests that this update might be an attempt to refine the proposal in response to feedback from the SEC, though no official comments have been made public. He also speculated that this could be a strategic adjustment, potentially designed to minimize the grounds on which the SEC could base a rejection.

In September 2023, ARK Invest and 21Shares submitted their application for this spot Ether ETF, which, if approved, would provide direct exposure to Ether and be listed on the Cboe BZX Exchange. The fund would utilize the CME CF Ether-Dollar Reference Rate – New York Variant as its pricing mechanism. 21Shares is acting as the sponsor, with Delaware Trust Company as the trustee and Coinbase Custody Trust Company safeguarding the underlying Ether assets. ARK Investment Management is involved as a sub-adviser and is also responsible for marketing the shares.

The SEC has delayed making decisions on several spot Ethereum ETF proposals, including those from Invesco Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock. The decision on VanEck’s application is due by May 23, with the ARK and 21Shares proposal following a day later on May 24.

Despite the SEC’s approval of spot Bitcoin ETFs on U.S. exchanges in January, the outlook for similar approvals for Ethereum-based ETFs has become less certain. Balchunas recently reduced his estimate of the likelihood of approval for a spot Ethereum ETF by the end of May from about 70% to just 25%.