VanEck, 21Shares, Canary Capital Petition SEC for Fair Crypto ETF Approval Process

VanEck, 21Shares, and Canary Capital have collectively petitioned the Securities and Exchange Commission (SEC) to reinstate the “first to file, first to approve” principle in the cryptocurrency ETF approval process. This move aims to restore predictability and fairness, addressing the uncertainty that arose from the SEC’s recent approval of multiple spot Bitcoin ETFs, where the traditional chronological review order was not followed.

The firms argue that reinstating this principle could streamline regulatory reviews and incentivize early, high-quality filings. This would benefit both issuers and investors by providing a clearer timeline and reducing ambiguity in the approval process. The “first to file, first to approve” principle functions as a queue system, where the earliest compliant application receives priority review. This approach rewards preparedness and fosters a more orderly and efficient regulatory process, which is crucial given the complexities inherent in crypto ETFs.

Historically, the SEC adhered to this principle across various ETF categories, including Bitcoin futures ETFs. However, the approval of multiple spot Bitcoin ETFs in January 2024 marked a departure from this norm. The SEC approved several applications concurrently, reflecting a more flexible, case-by-case review strategy. This shift introduced uncertainty for applicants regarding their relative standing in the approval queue. The letter from VanEck and its partners highlights this uncertainty and advocates for a return to a more predictable framework.

The push to reinstate the “first to file, first to approve” principle carries significant implications for the crypto ETF market. It promises increased efficiency by providing applicants with clearer timelines and incentivizing early, high-quality submissions. This could encourage innovation and competition, ultimately benefiting investors through a broader selection of regulated crypto investment products. However, the SEC must balance these benefits against the unique challenges posed by crypto assets, such as custodial risks, valuation complexities, and potential market manipulation.

If the SEC reinstates the “first to file, first to approve” principle, it could streamline the approval process for upcoming crypto ETFs, including those based on Ethereum and other digital assets. This would likely reduce the current unpredictability that firms face and could accelerate the introduction of new products to the market. Conversely, maintaining a flexible review process might allow the SEC to better assess the evolving crypto landscape and ensure that only the most robust and compliant products reach investors.

The joint appeal from VanEck, 21Shares, and Canary Capital represents a strategic effort to bring clarity and structure to the SEC’s crypto ETF approval process. By advocating for the reinstatement of the “first to file, first to approve” principle, these firms seek to foster a more transparent and efficient regulatory environment that rewards early and thorough preparation. While the SEC’s ultimate decision remains pending, this development highlights the ongoing dialogue between regulators and industry leaders striving to shape the future of crypto financial products. Market participants should monitor forthcoming SEC communications closely, as the outcome will influence the pace and nature of crypto ETF offerings in the near term.