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Crypto ETF issuers are urging the SEC to reinstate the “first-to-file, first-to-approve” rule, emphasizing fairness and innovation in the approval process for exchange-traded products.
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Leading asset managers VanEck, 21Shares, and Canary Capital argue that the current simultaneous approval approach favors larger firms and undermines early applicants.
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According to a joint letter shared by VanEck, this shift discourages original innovation and risks creating an uneven playing field within the crypto ETF market.
Crypto ETF issuers call on the SEC to restore the first-to-file approval rule, citing fairness and innovation concerns amid recent multiple ETF approvals.
SEC’s Shift in Crypto ETF Approval Sparks Industry Pushback
The recent trend by the United States Securities and Exchange Commission (SEC) to approve multiple crypto ETFs simultaneously has drawn criticism from prominent asset managers. VanEck, 21Shares, and Canary Capital have collectively requested the SEC to revert to the “first-to-file, first-to-approve” policy, which traditionally prioritized applications based on submission order. This change, they argue, disrupts the competitive landscape by granting larger firms an undue advantage while disadvantaging smaller or earlier applicants. The letter highlights that such a process undermines the integrity of the exchange-traded product (ETP) market and could stifle innovation by removing incentives for early filing.
Impact on Market Dynamics and Innovation Incentives
The letter references the 2021 launch of the first Bitcoin futures ETF, where ProShares secured a dominant market share shortly after approval, illustrating the benefits of a first-to-file system. However, the SEC’s January 2024 decision to approve 11 spot Bitcoin ETFs simultaneously, regardless of filing chronology, has blurred these lines. This approach, the issuers contend, promotes replication over innovation, as firms that file later receive equal benefits without the risks associated with pioneering new products. VanEck and 21Shares, early filers for both Bitcoin and Ethereum spot ETFs, found themselves grouped with latecomers during the approval process, further exemplifying the issue.
Future Outlook for Altcoin-Based Crypto ETFs
Following the recent approvals, VanEck, 21Shares, and Canary Capital have accelerated filings for altcoin-focused ETFs, including staked TRON and Cronos products. Despite these efforts, the SEC has delayed decisions on applications for Solana, XRP, and Litecoin ETFs. Industry analysts, such as Bloomberg Intelligence’s James Seyffart, estimate high approval probabilities for these altcoin ETFs, with XRP ETFs nearing 85% likelihood. Nonetheless, the current approval methodology risks repeating the same pattern of grouping early and late filers together, potentially discouraging proactive filings and innovation in the altcoin ETF space.
Regulatory Fairness and Market Stability Considerations
The asset managers’ appeal underscores broader concerns about regulatory fairness and market stability. By favoring a simultaneous approval process, the SEC may inadvertently create an uneven competitive environment, where strategic advantages tied to early application submission are diminished. This could lead to reduced product diversity and slower development of novel financial instruments within the crypto ETF sector. The letter calls for a transparent and equitable framework that balances investor protection with fostering innovation and competition.
Conclusion
As the crypto ETF market continues to evolve, the call from VanEck, 21Shares, and Canary Capital for the SEC to reinstate the “first-to-file, first-to-approve” rule highlights critical issues of fairness and innovation. Maintaining a structured and transparent approval process is essential to encourage early product development and preserve a level playing field among issuers. The SEC’s response to this request will significantly influence the trajectory of crypto ETF offerings and the broader digital asset investment landscape.
