How REX Shares’ Unconventional 40 Act ETF Strategy Could Reshape Dogecoin’s Institutional Adoption

The cryptocurrency market is no stranger to regulatory innovation, but REX Shares’ latest move—leveraging the 1940 Act to fast-track a Dogecoin ETF—could redefine how institutional capital flows into speculative digital assets. By bypassing the traditional SEC approval process, REX is not only accelerating the launch of the first U.S. Dogecoin ETF (ticker: $DOJE) but also challenging the status quo of crypto regulation. This strategy, dubbed a “regulatory end-around” by ETF Store president Nate Geraci [1], raises critical questions about market legitimacy, price dynamics, and the future of institutional adoption for tokens like Dogecoin.

The 40 Act Shortcut: A Game-Changer for Crypto ETFs

REX Shares’ approach hinges on a technicality in the Investment Company Act of 1940, which allows firms to register ETFs without prior SEC approval if they meet specific disclosure requirements. Unlike traditional ETFs, which require arduous filings like Form S-1 and Form 19b-4, the 40 Act pathway enables REX to file an effective prospectus and launch within weeks [1]. This strategy was previously used to expedite the Solana staking ETF and is now being applied to Dogecoin, with a potential launch date as early as September 12, 2025 [3].

The implications are profound. Competitors like 21Shares and Bitwise, which rely on the traditional approval process, remain stuck in regulatory limbo [2]. REX’s agility creates a first-mover advantage, allowing it to capture early institutional demand for Dogecoin—a token historically dismissed as a “meme coin” but now gaining traction as a speculative play in a maturing market.

Historical Precedent: Bitcoin ETFs and the Legitimacy Boost

The 40 Act strategy’s potential impact on Dogecoin can be contextualized through the lens of Bitcoin’s institutional adoption. The approval of spot Bitcoin ETFs in early 2024 under the same regulatory framework catalyzed a $73,000 price peak by March 2024, driven by $38.7 billion in net inflows [4]. These ETFs transformed Bitcoin from a fringe asset into a “digital gold” staple, with institutional investors allocating 1–3% of portfolios to hedge against macroeconomic risks [3].

Dogecoin, however, operates in a different risk profile. Its volatility and lack of intrinsic utility (compared to Bitcoin’s store-of-value narrative) mean that institutional adoption hinges on regulatory clarity and perceived legitimacy. REX’s ETF could bridge this gap by packaging Dogecoin into a SEC-compliant vehicle, shielding investors from direct exposure to the token’s idiosyncrasies while still granting access to its price action.

Price Dynamics: Volatility as a Double-Edged Sword

The introduction of a Dogecoin ETF under the 40 Act framework is likely to amplify price volatility, a duality observed in Bitcoin’s ETF-driven rally. Institutional inflows into $DOJE could create short-term supply shocks, particularly given Dogecoin’s infinite supply model and lack of halving events. For example, a $100 million ETF inflow would directly increase demand for Dogecoin without the supply constraints seen in Bitcoin, potentially driving sharp price spikes [4].

Conversely, outflows—triggered by regulatory scrutiny or market corrections—could exacerbate declines. This dynamic mirrors Grayscale’s GBTC discount, where liquidity mismatches between the fund and underlying asset created price dislocations [4]. Dogecoin’s ETF may face similar challenges, especially if the SEC later deems it a securities vehicle, inviting enforcement actions.

Broader Implications: A Regulatory Arms Race

REX’s strategy is part of a broader trend of regulatory arbitrage in crypto. The firm has also filed for ETFs tracking the TRUMP token, XRP, and BONK using the same 40 Act framework [1]. This approach exploits gaps in the SEC’s enforcement priorities, which have historically focused on fraud rather than structural market design.

However, the long-term viability of these ETFs depends on the SEC’s response. If the agency cracks down on “regulatory shortcuts,” REX’s model could face legal challenges, as seen with the ongoing XRP litigation. Yet, the political climate—shaped by President Trump’s strategic Bitcoin reserve and the GENIUS Act—suggests a more crypto-friendly regulatory environment [2]. This creates a paradox: REX’s ETFs may thrive in the short term but remain exposed to sudden policy shifts.

Conclusion: A High-Stakes Bet on Institutional Appetite

REX Shares’ Dogecoin ETF represents a high-stakes bet on institutional appetite for speculative crypto assets. By leveraging the 40 Act, the firm is accelerating Dogecoin’s integration into mainstream finance, but at the cost of regulatory uncertainty. For investors, the key question is whether the ETF’s structural advantages outweigh its inherent risks.

As the market awaits the $DOJE launch, one thing is clear: REX’s strategy underscores the evolving interplay between regulatory agility and market legitimacy. In a sector defined by innovation, the line between disruption and compliance grows thinner by the day.

Source:
[1] Dogecoin may see first-ever ETF launch next week: Analyst, [https://cointelegraph.com/news/dogecoin-etf-united-states-launch-next-week-analyst]
[2] Here Are 3 Ways President Trump's Crypto Policy, [https://www.aol.com/3-ways-president-trumps-crypto-094500936.html]
[3] Here's Why Bitcoin Can Act Like 'Digital Gold' in Your Portfolio, [https://www.nasdaq.com/articles/heres-why-bitcoin-can-act-digital-gold-your-portfolio-says-investing-expert]
[4] Evaluating the impact and future role of Bitcoin Spot ETFs after 5 months of trading, [https://fsblockchain.medium.com/evaluating-the-impact-and-future-role-of-bitcoin-spot-etfs-after-5-months-of-trading-a6b2ee1c8baf]