ARK Invest and 21Shares have submitted an updated filing for their spot Ether exchange-traded fund (ETF) proposal, removing the clause related to staking plans. In the previous filing on February 7, 21Shares had stated its intention to stake a portion of the fund's assets through third-party providers and classify the resulting earnings as income generated by the fund.

The updated filing, submitted on May 10, no longer includes the section discussing staking plans. However, it retains broader comments addressing potential risks associated with staking, such as slashing penalties, temporarily inaccessible funds during bonding and unbonding, and the potential impact on the price of Ether (ETH).

Bloomberg ETF analyst Eric Balchunas suggests that this revision may be in response to potential feedback from the United States Securities and Exchange Commission (SEC), despite the absence of official comments from the regulator. Alternatively, Balchunas proposes that the change could be a last-ditch effort or a strategic move to limit the information available for the SEC to base a potential rejection on.

ARK Invest and 21Shares initially submitted their application for a spot Ether ETF in September 2023. The proposed fund aims to provide direct exposure to Ether and will trade on the Cboe BZX Exchange if approved, utilizing the CME CF Ether-Dollar Reference Rate – New York Variant. 21Shares will act as the sponsor, with Delaware Trust Company serving as the trustee and Coinbase Custody Trust Company holding the underlying Ether assets. ARK Investment Management will serve as a sub-adviser, responsible for marketing the shares.

The SEC has been delaying decisions on several spot Ether ETF proposals, including those from Invesco Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock. The regulator must decide on VanEck's spot Ethereum application by May 23, followed by Ark and 21Shares's application on May 24.

While the SEC approved the listing and trading of spot Bitcoin ETFs on U.S. exchanges in January, optimism for the approval of spot Ethereum ETFs has dwindled in recent months. Bloomberg ETF analyst Eric Balchunas has lowered his estimate of the chances of a spot Ethereum ETF approval by late May from about 70% to 25%.

The revision of ARK Invest and 21Shares's spot Ether ETF proposal highlights the challenges faced by asset managers in navigating the regulatory landscape surrounding cryptocurrency-based investment products. The removal of staking plans from the proposal may be an attempt to address potential concerns raised by the SEC, as staking has been a topic of interest for regulators in recent months.

As the cryptocurrency industry continues to evolve and mature, asset managers and regulators alike are grappling with the complexities of bringing traditional investment vehicles, such as ETFs, to the digital asset space. The ongoing delays and revisions to spot Ether ETF proposals demonstrate the cautious approach taken by the SEC in evaluating these novel investment products and the efforts made by asset managers to address regulatory concerns.

The outcome of ARK Invest and 21Shares's revised spot Ether ETF proposal, along with the decisions on other pending applications, will provide valuable insights into the SEC's stance on cryptocurrency-based ETFs and the future of these investment vehicles in the United States. As the regulatory landscape continues to develop, the cryptocurrency industry will be closely watching the SEC's decisions and their potential impact on the adoption and mainstream acceptance of digital assets.