The Teucrium XRP ETF fund was launched not by direct approval but due to the fact that the SEC failed to meet its review deadline.
This is because the lapse occurred due to the SEC’s transition to limited operations following a government shutdown that took effect on October 1. At this time, the agency declared that it would have a small number of staff to serve the interests of market integrity and investor protection.
Crypto analyst Chad Steingraber noted that the ETF was not ratified but was given the go-ahead when the statutory term expired. He referred to the result as one whereby he reported silence as compliance. The incident highlights the fact that certain ETF filings can be completed under current legislation when the SEC is unable to take action.
Futures-Style ETFs Move Forward While Spot Funds Freeze
According to financial journalist Eleanor Terrett, the XRP ETF, offered by Teucrium, is a product in the form of a futures contract. It owns Treasury securities, cash, and swap receivables and was registered under the Investment Company Act of 1940. This structure enables such funds to become effective automatically, even without review, as per the waiting period for the automatic activation of these funds.
On the contrary, spot crypto funds are registered as per the Securities Act of 1933 and must be approved directly before they can be traded. These filings are currently paused due to the SEC’s understaffing during the shutdown. The development of futures-based ETFs continues, and spot funds will have to wait until the agency returns to normal operations.
The SEC’s shutdown plan ensured that all non-essential workers were furloughed, travel and paid vacations were canceled. The agency noted that the furloughed employees were not allowed to volunteer to work without pay as required by the Antideficiency Act.
Issuers Continue to File Despite the Freeze
Although the SEC has been relatively inactive, crypto issuers are submitting new ETF filings. Over 30 applications for crypto-related ETFs were submitted in early October. REX-Osprey has applied 21 funds, including AAVE, ADA, ATOM, and ENA, and Defiance has applied six leveraged crypto ETFs with both long and short exposure to Bitcoin, Ethereum, and Solana.
According to Bloomberg analyst James Seyffart, the goals of Defiance’s products are to achieve three times leverage via options strategies, which may circumvent the SEC’s two times leverage restriction. He also noted that such filings indicate the constant attempts of issuers to remain ahead of changes in regulations.
The SEC approved changes to listing standards in major exchanges, which made the listing of crypto-related ETFs more efficient, in mid-September. Eric Balchunas of Bloomberg said it was virtually automatic to have altcoin ETF approvals due to the rule change. However, as all S-1 processing comes to a halt due to the shutdown, Balchunas termed the present scenario a “rain delay” to the crypto ETF market.
