ETF issuers say the SEC approval process now favors big firms and hurts smaller competitors.
Approving all ETF applications together reduces innovation and limits investor product choices.
Issuers want the SEC to return to the first to file method to ensure a fair market for all players.
Exchange-traded fund issuers are challenging the U.S. Securities and Exchange Commission’s current method of approving ETF applications. Canary Capital, 21Shares, and VanEck submitted a joint letter asking the agency to return to its traditional first-to-file policy.
https://twitter.com/vaneck_us/status/1931038867785744836
The letter, shared publicly on June 6, criticized the SEC’s shift away from this long-standing approval process. The issuers raised concerns that approving multiple ETF applications at once creates unfair competition.
Smaller Firms Claim Disadvantage
According to the letter, the simultaneous approval method favors larger companies. These firms often have stronger market reach and more resources. In contrast, smaller issuers lose early mover advantages and struggle to compete.
The ETF issuers argue this change began in October 2021. At that time, ProShares received early approval to launch a Bitcoin Futures Fund. That fund entered the market three days before its rivals and captured over 90% of the share. This event marked a major shift from the SEC’s traditional order-based system.
Concerns Over Market Innovation
The issuers warned that this new process discourages innovation. When firms can benefit by copying others, fewer are willing to invest in new products. This leads to reduced investor choice and limits market development.
The letter also pointed to the SEC’s approval of 11 spot Bitcoin ETFs on January 10 last year. Despite different filing dates, the agency approved all at once. The same approach was used for Ethereum ETFs several months later. Firms that filed later still captured large market shares, frustrating early applicants.
Wider Market Impact Feared
The three issuers highlighted broader implications. They warned that abandoning the first-to-file model harms competition and investor access. They believe the practice makes it harder for newer and smaller companies to succeed.
The SEC's recent actions, they argue, go against its stated mission. That mission includes protecting investors and supporting market efficiency. By approving all applications together, the SEC may be undermining its goals.
Future Crypto ETFs May Face Similar Approval Issues
The SEC is currently reviewing many new ETF filings. These include applications tied to digital assets like Solana, XRP, and Dogecoin. Many were submitted in the past year, reflecting hope for more favorable regulation.
Asset managers now fear the SEC may again approve these applications all at once. They warn that doing so would repeat past issues and further skew competition. The issuers emphasized that restoring the first-to-file system is key to maintaining fair and efficient markets.
