SEC Drowning in ETFtober Filings: 5+ Crypto Funds Hit Desk Amid Shutdown Gridlock – What’s the Fix?

The U.S. Securities and Exchange Commission (SEC) is facing a wave of new crypto exchange-traded fund (ETF) filings, even as a prolonged government shutdown stalls decisions and leaves dozens of products in limbo.

At least five new crypto ETFs landed on the SEC’s desk this week alone, showing the growing rush among asset managers to secure approval before the year ends.

But with the agency operating under skeletal staffing due to the shutdown, now in its fourth week, nearly all reviews have come to a standstill.

Is the U.S. Entering a New Era of Crypto ETFs or Testing the SEC’s Patience?

The latest entrant came from VanEck, which on Thursday filed an S-1 form for the VanEck Lido Staked Ethereum ETF. The fund is designed to track the performance of stETH, the liquid staking token issued by Lido, the largest Ethereum staking platform.

VanEck’s filing notes that the trust “expects to accrue certain staking rewards through its ownership of stETH,” reflecting the yield-generating nature of Lido’s liquid staking model.

Lido currently holds about 8.5 million ETH, worth roughly $31 billion, offering a 3.3% staking yield to depositors. VanEck registered a statutory trust in Delaware earlier this month, indicating early steps toward product launch.

While VanEck expands its staking-based ETF lineup, other issuers are experimenting with more complex structures. On Thursday, 21Shares filed for a leveraged crypto ETF offering 2x exposure to the Hyperliquid token (HYPE), marking one of the more unconventional filings of the month.

Bloomberg ETF analyst Eric Balchunas described it as “so niche… but then you could look up in 3-4 years it’s got a few billion,” calling the current ETF climate “a total land rush.”

Cathie Wood’s ARK Invest also added to the pile with three new Bitcoin ETFs earlier in the week.

The ARK Bitcoin Yield ETF will pursue income through yield-based strategies like selling options, while the ARK DIET Bitcoin 1 and DIET Bitcoin 2 ETFs are structured to provide partial downside protection with varying thresholds tied to Bitcoin’s quarterly price movements.

Meanwhile, Volatility Shares submitted filings for a suite of 3x and 5x leveraged ETFs tied to both crypto and major U.S. stocks.

Analysts said the filings included the first-ever 5x ETF proposal in the United States, an aggressive approach that has already raised concerns about regulatory compliance with the SEC’s Derivatives Rule (Rule 18f-4), which limits leverage to 2x.

Brian Daly, director of the SEC’s Division of Investment Management, told Reuters that “it is unclear whether these ETFs would comply” with existing leverage rules.

Government Shutdown Stalls SEC—What Happens to Crypto ETFs Now?

The SEC’s review process has effectively halted as the federal government enters its 17th day of shutdown, leaving most of its staff furloughed.

Only a skeleton crew remains to handle essential operations, freezing dozens of pending filings, including a surge of crypto ETF applications.

Around 16 crypto ETFs were awaiting final decisions this month, with at least 21 new applications filed in just the first eight days of October.

Without congressional action to reopen the government, the backlog is expected to grow further, pushing deadlines well into November.

The shutdown began on October 1 after Congress failed to pass a spending bill. Republicans are demanding cuts to address the $37.8 trillion national debt, while Democrats want to preserve healthcare programs and tax credits.

Until a resolution is reached, the SEC cannot issue approvals or publish final orders.

Additionally, just before the shutdown, the SEC had moved to streamline crypto ETF approvals. In September, it voted to let the NYSE, Nasdaq, and Cboe Global Markets adopt generic listing standards for digital asset and spot commodity ETFs.

The rule change, first outlined in July, intended to cut approval timelines from 240 days to 75 days, reducing the need for dual filings from asset managers and exchanges.

The reform could soon open the door for ETFs tracking Solana and XRP, but for now, filings such as 19b-4 forms and S-1 registrations remain frozen.

ETF Inflows Surge Despite Regulatory Pause

Despite the ongoing administrative slowdown, global appetite for crypto ETFs remains strong.

New data from ETFGI shows total ETF assets climbed to a record $12.7 trillion at the end of September, up 22.7% from $10.35 trillion at the close of 2024.

In September alone, U.S. ETFs attracted $152.5 billion in net inflows, the second-highest monthly total on record. That pushed year-to-date inflows to $951.27 billion, already surpassing last year’s full-year record of $740.78 billion.

The data added that ETF assets have now recorded 41 consecutive months of net inflows, indicating consistent investor confidence despite higher interest rates and market volatility.

Balchunas noted that ETFs could reach $1 trillion in assets by the end of the week, given a recent pace of $30 billion in weekly inflows.

Among standout performers, BlackRock’s iShares Bitcoin Trust (IBIT) has generated roughly $245 million in fees in just 22 months, making it the firm’s most profitable ETF to date.

With $97.8 billion in assets, IBIT is on track to become the first ETF to cross the $100 billion mark faster than any in history.

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