Spot bitcoin and ether ETFs: what the SEC approvals changed for traders

US investors could already gain exposure to bitcoin in several ways before 2024, as the SEC itself noted, including through brokers, mutual funds and the Grayscale Bitcoin Trust. What they could not buy was an exchange-listed fund holding the coin. That changed in January 2024, when the Securities and Exchange Commission (SEC) allowed exchanges to list shares of trusts that hold bitcoin itself. Ether followed later that year. The products are often called ETFs; the SEC’s documents call them exchange-traded products, or ETPs.

This article sets out what the SEC approved, how the funds work and what separates a fund share from the coin. It does not forecast prices or flows.

January 2024: bitcoin

On 10 January 2024, the SEC approved rule changes by three exchanges, NYSE Arca, Nasdaq and Cboe BZX, to list and trade shares of eleven trusts holding spot bitcoin. They included the conversion of the Grayscale Bitcoin Trust, alongside new funds including those of iShares, Fidelity, Bitwise, ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Franklin, Valkyrie and Hashdex.

The approval reversed a long run of refusals. In a statement the same day, then SEC Chair Gary Gensler said the Commission had disapproved more than 20 exchange filings for spot bitcoin ETPs from 2018 through March 2023. What changed, he said, was a ruling by the US Court of Appeals for the District of Columbia that the SEC had failed to adequately explain its reasoning in rejecting Grayscale’s proposal. The court vacated that decision, and Gensler described approval as “the most sustainable path forward”.

The statement was careful about what the approval did not mean. It was limited to products holding one non-security commodity, bitcoin. “We did not approve or endorse bitcoin,” Gensler said, and he stressed that the action did not endorse the funds’ custody arrangements or crypto trading platforms.

May and July 2024: ether

On 23 May 2024, the SEC approved similar rule changes allowing the same three exchanges to list eight trusts holding spot ether, including the Grayscale Ethereum Trust.

Exchange approval was only the first step. Each fund also needed its registration statement to become effective before it could start trading. The iShares Ethereum Trust’s annual report, for example, says its registration statement was declared effective on 22 July 2024 and its shares began trading on Nasdaq the next day.

The May order also drew a line on staking. It stated that the proposals did not contemplate staking the trusts’ ether, and that any future plan for a trust’s ether to be used in proof-of-stake validation, or to earn additional ether or other income, would need a new rule filing.

How the funds work

A spot crypto ETP is a trust that holds the coin and issues shares against it. Its shares trade on a stock exchange like any listed security, through a normal brokerage account.

New shares are created, and old ones redeemed, in large blocks by broker-dealers known as authorised participants. The iShares Ethereum Trust’s report, for instance, describes baskets of 40,000 shares. This process is what keeps the share price close to the value of the coins the fund holds: if the shares trade above that value, participants can create new ones; if below, they can redeem. The fund’s report warns that if the process runs into difficulties, the share price may diverge from its net asset value.

When the products launched, creations and redemptions were made in cash: the fund bought or sold the coins itself. On 29 July 2025, the SEC voted to permit in-kind creations and redemptions, in which authorised participants deliver or receive the coins directly, bringing bitcoin and ether funds into line with other commodity-based ETPs. SEC Chairman Paul Atkins said the change would make the products less costly and more efficient.

Share versus coin: what differs

For a trader, a fund share and the coin it tracks are not the same thing. Using the iShares Ethereum Trust’s annual report as an example, the differences include:

• Custody. The fund’s ether is held by a custodian, in this case Coinbase Custody Trust Company, which keeps the private keys in cold storage. Shareholders do not hold keys or wallets themselves; they rely on the custodian’s security and the fund’s disclosures.
• Trading hours. The shares trade on Nasdaq until 4pm Eastern time, while ether markets operate around the clock. The report notes that moves outside exchange hours are not reflected in the share price until trading reopens, and that spreads and the premium or discount to net asset value may widen as a result.
• Price versus value. Shares may trade at, above or below their net asset value, which is calculated from a benchmark index.
• Fees. The fund charges a sponsor’s fee, accrued daily. For this trust it is 0.25% a year of net asset value. Fees differ between funds and are set out in each prospectus.
• Staking. The trust does not stake its ether, so, as its report states, returns can differ from holding ether directly, where the coins could earn staking rewards.
• Legal status. The trust is not a registered investment company under the Investment Company Act of 1940, and the report states that shareholders therefore do not have the regulatory protections provided to investors in registered investment companies.

What the shares do offer, according to the same report, is exposure through a familiar securities account without managing wallets and keys or dealing with a crypto trading platform. Gensler’s 2024 statement added that broker-dealers recommending the products to retail investors are bound by Regulation Best Interest, and investment advisers by their fiduciary duty.

What has changed since

The SEC’s approach has moved on since 2024. Official releases record several steps:

• July 2025: alongside in-kind creations, the SEC approved an ETP holding both spot bitcoin and spot ether, options on certain spot bitcoin ETPs, FLEX options on some bitcoin-based ETPs, and higher position limits for options on certain bitcoin ETPs, of up to 250,000 contracts.
• September 2025: the SEC approved generic listing standards at three exchanges for ETPs holding spot commodities, including digital assets. Qualifying products can now be listed without a separate SEC rule-change filing for each. The same day it approved the Grayscale Digital Large Cap Fund, which holds several digital assets based on the CoinDesk 5 Index.
• March 2026: the SEC, joined by the Commodity Futures Trading Commission, issued an interpretation of how the securities laws apply to crypto assets. It sets out categories of crypto asset and addresses activities including protocol staking.

The result is a wider range of listed crypto products than the handful of single-coin funds approved in 2024. Every product still carries the underlying asset’s volatility, and each one’s structure, custodian and fee are set out in its own filings.

What to check before buying

Read the prospectus or annual report of the specific fund. It will name the custodian and describe how keys are held, state the fee, explain how creations and redemptions work, and say whether the fund stakes. Watch the gap between the share price and net asset value, especially at the open after weekend moves in the coin. And remember the point made in the original approval: the SEC approved the listing of the shares, not the asset behind them.