Altcoin ETFs encounter delays due to the absence of regulated futures markets. Recent filings, such as WisdomTree’s XRP Fund, reflect increasing interest in these investment vehicles. However, the approval of altcoin exchange-traded funds (ETFs) for assets like Solana (SOL), XRP, Litecoin (LTC), and Hedera (HBAR) remains uncertain, with decisions potentially delayed until late 2025, according to Bloomberg analyst James Seyffart. Regulatory challenges and market constraints are the key obstacles.
The U.S. Securities and Exchange Commission (SEC) has rejected altcoin ETF applications due to the lack of futures markets regulated by entities like the CME. Bitcoin and Ethereum ETFs succeeded because of their connection to CME-regulated futures, a structure that most altcoins lack, thereby stalling their ETF development.
Rising Interest in Altcoin ETFs
Despite these challenges, there is growing enthusiasm for altcoin ETFs, as shown by applications like WisdomTree’s “XRP Fund.” However, hurdles such as custody issues, compliance concerns, and the potential for market manipulation remain significant barriers. Seyffart predicts that a more crypto-friendly SEC leadership in 2025 could accelerate the approval process.
Seyffart also noted that staking could play a pivotal role in future ETFs, though current regulations prohibit staking in ETF structures. A pro-crypto administration might introduce staking allowances by 2025, further driving demand for these products.
Approval Pathways and Challenges
The timeline for ETF approvals depends on the filing process. ETFs must either follow the 19b-4 rule filings, which include fixed deadlines, or S-1 filings, which lack defined timeframes. While Bitcoin and Ethereum ETFs utilized the 19b-4 process, most altcoin ETFs have not yet taken this route. Even if initiated now, regulatory decisions could extend into late 2025.
Multi-asset ETFs may offer a partial workaround. Products like Grayscale’s GDLC and Bitwise’s Crypto 10 Index, which primarily focus on Bitcoin and Ethereum, include smaller allocations to altcoins. Seyffart explained that such diversification might face fewer regulatory challenges, but SEC approval will still depend on whether altcoin holdings align with existing regulatory frameworks.
