SEC approved exchange rules for two bitcoin-ether index ETFs

The U.S. Securities and Exchange Commission on December 19, 2024 approved exchange rule changes allowing Nasdaq to list the Hashdex Nasdaq Crypto Index US ETF and Cboe BZX Exchange to list the Franklin Crypto Index ETF. Both proposed products were designed to hold spot bitcoin and spot ether, with allocations tied to free-float market capitalization.

The decision mattered because it extended the regulated exchange-traded product structure from single-asset spot bitcoin and spot ether exposure to a combined basket. It was a listing-rule approval, however—not confirmation that either fund had begun trading, attracted assets or delivered investment performance on December 19.

What the order approved

SEC Release No. 34-101998 approved Nasdaq file SR-NASDAQ-2024-028 and approved Cboe BZX file SR-CboeBZX-2024-091 on an accelerated basis. The Hashdex shares were proposed under Nasdaq Rule 5711(d), while the Franklin shares were proposed under BZX Rule 14.11(e)(4); both rules covered commodity-based trust shares.

The Commission found the proposals consistent with Section 6(b)(5) of the Securities Exchange Act, including requirements aimed at preventing fraudulent and manipulative acts and protecting investors and the public interest. It also found them consistent with the market-information objectives of Section 11A(a)(1)(C)(iii).

That finding did not amount to an SEC endorsement of bitcoin, ether or the funds’ prospective returns. It meant the exchange proposals, as represented in the filings, satisfied the statutory standards the Commission applied to listing and trading.

The surveillance case carried over

The SEC’s reasoning built directly on its January 10, 2024 spot-bitcoin ETP order and May 23, 2024 spot-ether ETP order. Nasdaq and BZX have surveillance-sharing arrangements with the Chicago Mercantile Exchange, and the Commission determined that CME futures surveillance could assist in detecting manipulation affecting the related spot markets.

For bitcoin, the Commission examined CME bitcoin futures against Coinbase and Kraken spot returns from October 1, 2021 through August 22, 2024. Across the full sample, correlation was at least 98.9% at hourly intervals, 93.9% at five-minute intervals and 83.1% at one-minute intervals. Those are regulatory correlation results for specified venues and sampling frequencies, not proof that manipulation could never occur and not a measurement of the funds’ event-day market impact.

The order said the Commission reached the same core conclusion for ether and found both spot markets remained consistently highly correlated with their corresponding CME futures markets. Because the two trusts would combine assets already considered in earlier single-asset approvals, the Commission said their structures and trading arrangements were otherwise substantially similar to previously approved products.

A basket, not an open-ended crypto fund

On the December 19 record, both products contemplated spot bitcoin and ether rather than an unrestricted portfolio of tokens. Their proportions would follow free-float market capitalizations, so the mix could change with the index methodology and rebalancing rather than remain a permanently fixed split.

The Franklin amendment stated that the fund would hold only bitcoin, ether, cash and cash equivalents even if another crypto asset later entered its reference index. It also described cash creations and redemptions in blocks of 50,000 shares and prohibited staking the fund’s ether. Hashdex’s amended filing similarly limited the trust to bitcoin and ether, apart from cash or cash equivalents for expenses, and said its ether would not be staked.

Those operational limits were important. The products offered securities-market exposure to the price movements of two spot crypto assets, but they did not promise protocol staking income or broad diversification across the digital-asset market.

What remained unresolved on December 19

The exchange approvals removed a central regulatory obstacle but were not the last launch condition. The Hashdex notice said its registration statement was not yet effective. The Franklin amendment likewise said its Form S-1 was not yet effective and that shares would not trade until effectiveness.

Accordingly, the verified December 19 development was permission for the exchanges to list the proposed products under the approved rules. Trading dates, final investor economics, opening assets, liquidity and market reception were still unresolved in the contemporaneous record. No event-day price move can be attributed to the order from the reviewed primary materials.