Aug 4, 2023

Volatility Shares has filed an application with the U.S. Securities and Exchange (SEC) for an ether (ETH) futures-based exchange-traded fund (ETF), with other entities following suit.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Welcome back. This is first move on now. There has been a flood of applications with the SEC for Ether Futures. ETF S. The number is currently around a dozen T shares was the first to kick that new race off by filing an application last week and others have followed suit. Joining us now is well, you guessed it. Wall Little shares, co-founder and Chief Investment Officer Stuart Barton. Welcome Stewart. Hi, I'm thanks for uh thanks for having me on. Yeah, it's a pleasure. Uh Yeah, look, I wanna think about Masterchef right now a little bit because you know, the SEC has never approved any ETF applications tracking Ethereum futures contracts, but you seem to have the secret sauce. You proved it once we get into that a little later. But look, you did it on Friday and everyone kind of followed suit next week. Monday, Tuesday. Why? Like what do you know that? We don't know? Well, um yeah, I I I'm not so sure it's what we know that, that others don't know but what I put it down to is, um, we're a young, small ETF firm. I think we're more able to innovate in this space than possibly others. So, you know, we perhaps got bigger fish to fry and I have got other, have got other concerns. I think the sort of crypto space and, and others kind of alternative asset spaces are kind of ripe for, for sort of, um, new inno innovative thinking and you're bringing a different solution to the problem. I mean, what, what we've noticed and we've seen it in the spots, uh, race as well. What we've noticed is, it seems like, you know, traditional asset managers are following this, um, repeated approach to the SEC, which in reality hasn't changed much for years where we, we kind of take a different approach. We, we sort of look at it and think, well, let, let's, let's approach this in a slightly different way, you know, let's, let's, you know, let, let, let's go at some new ideas and, you know, perhaps everybody, you know, knows about the, the, the, the methods that we've, we've, we've used, but at the end of the day, maybe not everybody was willing to do so. Um, so, yeah, that's how we found ourselves. We, we filed last Friday. Um, so we're presently first in the race and hopefully we'll be the first to launch Stewart. I have to say you're brave. Um, because if I were to bet my life as to whether or not, uh, uh, Gary Gensler and the SEC views, uh, Ether as a security. I, I would not want to be in that bet. II, I just would not risk my, I wouldn't risk anything. Uh, because quite frankly it seems as if the SEC has been hinting that Hinman, notwithstanding, they think Ether is an SD I is a, is, is a security. So what gives you the confidence that you would get this ETF passed considering? First of all, as you said, all these prior applications have failed because they, they, they didn't do it the right way. Blackrock doesn't know what it's doing. All these guys don't know what's happening, uh, when it came to Bitcoin, but here, now Ether, you somehow see it as something that will allow, um, that, that it's something that the, the SCC will be like, you know what? That's fine. We're, we're fine with it. It's nice to get, I, I'm still trying to grapple that part. Right. So, I mean, in the ETF space, um, Ether has got much more in common with Bitcoin than it has with any of the other coins or tokens. And, and the reason for that is, uh, there are regulated futures listed on Ether and there are regulated futures, um, listed on, on, on Bitcoin. So the, the, there, there's going to be this ongoing, um, discussion about, you know, what's better, it's a spot better than a futures based. ETF, the reality is I I, I'm not, I'm not sure anybody really has the answer to that. But what, what I do know is that bringing an ETF to markets that uses the financial infrastructure, this financial regulation and infrastructure that already exists is a lot easier than trying to work around it. So, you know, trying to use coins that are traded on unregulated exchanges, possibly on market make by um unregulated market makers, et cetera is always going to be a much bigger lift than using the infrastructure that exists. So our approach has been to use rules that were um adopted um around, around ETF S and to use products that to trade products on the underlying, that are already regulated by the SEC or the CFTC. And that, that's where, that's where Ether differs. So e Ether futures trading on the CME are liquid, um the, the open interest in them has been growing, you know, so we look at this and we say, well, you know, we, we, we, we're willing to have that argument and say what, what's really the difference here between these and Bitcoin A a and you know, a a as you point out, of course, the ETF is this is a futures ETF which as you know, of course, that the there are other future ETF S that deal with Bitcoin. But nonetheless, I mean, isn't there the sort of risk that the SEC might say, you know what? OK, sure CFTC, you can you, you have this futures change? You, you have this futures contracts that you, you, you permit to, to, uh, exist if on Ether. But we're not comfortable with all of this, even though we were comfortable with Bitcoin, we're not comfortable with Ether. I, I mean, are you willing to go to the, uh, it seems like you're willing to go to the mat and try to get, get this, uh, uh, resolved on your dime. That's right. I, I think personally, I don't think the biggest hold up um, with an Ether ETF or Ether futures ETF has necessarily been the, whether it's a security, whether it may in the future be declared a security or not. I don't think that was the biggest hold up that said it clearly is going to be one of them. And I think by making this filing, the, the question has to be asked, maybe it will be asked and answered, maybe it will be asked and it will sit in the courts for some years. But at least now we're at a point where I, I think the question has to be asked and, you know, this may actually bring about um an important step in, in, in the whole sort of evolution of, of, of crypto, you know, evolution into the, into the formalized um regulated financial industry. So, you know, back in June uh volatility two Bitcoin strategy ETF, it became the first leverage crypto ETF available in the US. Now, that's as literally proving that you have a secret source and there's something else coming after that, which is your ETF application now. And there are two conversations happening. One is, will the SEC approve this? And the second is, wait, 12 products, seven different firms have quickly, you know, filed with the SCC, that's a race for sure. And you triggered that race. So to that second point, are you concerned about what some might say are copycat filings and whether the AC C if they choose to approve like gray scale as us and spot Bitcoin, you know, ETF S that they all approve at the same time, but then you file first and then everyone kind of followed or, or copycats, I don't know. So, like, how do you feel about that? You know, I think it was inevitable that there was going to be copycat filings that, you know, this is relatively common in the ETF space. Usually people file, you know, days whenever they can get their filing together, but they'll file some days after a filing that they believe will, will, will go through. Um, and then you, and then it's kind of a race slash, um, a kind of question. Do you, do you carry on with your filing if you know, you're gonna be second to market, you know, the second to market product product often is much, much smaller. It doesn't have the liquidity, etcetera. The first one. So, yeah, it's a concern but we went into this knowing that that was, that was gonna be the case um in terms of, of sort of where we stand or, or without, you know, previous discussions with the SEC, you know, we the, the two times leverage Bitcoin um ETF that we launched a little over a month now. Um, but that everybody was telling us there's no way that the SEC was, would, would, um, would, would, would allow that to be trade up and listed in trading. And, but nobody's really asking the question why, you know, why wouldn't they, you know, they, so, well, there's kind of this feeling that they might be against leverage or they might be against crypto in general. That's not been our experience. We, we found the regulators to be very helpful in, in letting us or encouraging us to think about things in, in, in better ways and, and, you know, we'd actually be very, um inspired almost by, by, by some of our, some of our conversations with them. So, you know, we, we've been, we've been through a long process with them on, on the, on the two times Bitcoin ETF. And now we're moving forward and saying, well, the same sort of approach, sort of why wouldn't the similar sort of rules apply to Ether? And I, and I think that it's, it's a tough one to answer. Like if, if I was on both sides of this argument. I think I'd rather be on our side. You know, that's the position we're taking that says, you know, innovation is there for a reason. We've got to move the argument forward. We can't just be sitting here and going. Oh, it can't be because like, ok, let's pick that apart of, let's ask her why, tell me why. And I think that's what we do. All right. Ok. Um, Stuart, you know, you obviously had a different experience with the AC C, but as we know, there are several other firms and exchanges that have had very, very different experiences from the one that you had. But, uh, we appreciate you coming on board and talking to us. Uh, even while a filing is being considered by the AC C, that's really, uh, you know, that's, we're really thankful for that. That was Walter chair as co-founder and Chief Investment Officer Stewart Barton. Thanks. Thank you.

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