Why Ethereum ETPs (vs. ETFs) are so significant, & more FAQs

ETFs are trusts that primarily hold securities, ETPs are trusts that primarily hold non-securities. As a result, ETPs are registered on SEC Form S-1, which is generally used for offers and sales of securities of issuers that are not “investment companies” under the Investment Company Act of 1940 (the “40 Act”). In contrast, ETFs register on SEC Form N-1A, a form specifically designated for investment companies.

Put simply, an investment company is an entity that is:

  • engaged in the business of investing, owning, holding, or trading in securities; and

  • owns “investment securities” having a value exceeding 40% of the value of the entity’s total assets (exclusive of U.S. government securities and cash items).

This regulatory difference has significance. ETPs are treated like all other public companies and, while they must comply with the reporting and other requirements of the Securities and Exchange Act of 1934, they are not subject to the additional layer of regulation that comes with being a registered investment company. By contrast, ETFs, because they are in the business of investing in securities, become subject to the Investment Company Act of 1940, and must comply with its many restrictions on liquidity, affiliated transactions and a host of other compliance matters.