Fidelity has submitted a revised S-1 application to the SEC for its Ether exchange-traded fund (ETF). The asset management company filed the updated application, clarifying that the underlying Ether tokens will not be staked. S-1 filings are mandatory registration forms for publicly traded securities products in the US.
This amended filing comes after reports that the SEC has reversed its stance on spot Ether ETFs, possibly due to political pressure. According to reports, the SEC has requested ETF issuers to update their 19b-4 filings. The next SEC deadline is May 23 for VanEck’s Ether ETF proposal. Bloomberg ETF analyst Eric Balchunas has increased the approval odds to 75% from 25%, but this only applies to the 19b-4 form.
However, Ether ETF issuers also need approval for their S-1 filings, as stated by Bloomberg ETF analyst James Seyffart in a May 20 post. The SEC has previously attempted to categorize Ether as a security, and Ethereum’s transition to proof-of-stake (PoS) may provide another reason for the regulator to do so. During a Senate Banking Committee hearing in 2022, SEC Chair Gary Gensler reportedly suggested that cryptocurrencies and platforms allowing holders to stake their crypto may be considered securities under the Howey test.
Despite the SEC’s change in stance on Ether ETFs, staked Ether may still be classified as a security, according to Alex Thorn, the head of research at Galaxy Research. Thorn mentioned that Fidelity’s initial S-1 application, filed on March 27, stated the intention to stake a portion of the fund’s ETH supply. The application acknowledged the additional risks associated with staking, such as potential loss of funds through slashing penalties and liquidity risks during the staking process. Staking rewards would also be considered taxable income for the fund, leading to a taxable event for investors without a corresponding distribution from the Trust.