The headline grabbing news that the Securities and Exchange Commission (”SEC”) approved rule changes that allowed the listing of bitcoin 33 Act ETPs has put focus on exchange-traded funds that register their shares under the Securities Act of 1933, as amended (the “33 Act” and “33 Act ETPs”).
33 Act ETPs are different from the more commonly offered exchange-traded funds that are required to register as an investment company under the Investment Company Act of 1940, as amended (the “40 Act” and “40 Act ETFs”). 33 Act ETPs are not regulated under the 40 Act like 40 Act ETFs but are regulated by securities and broker-dealer regulations that typically apply to securities offerings by corporate issuers.
The excitement around this development is driven, in part, by the potential for the 33 Act ETPs to provide retail investors with direct exposure to the price of digital assets without the need for the investors to take custody of and secure digital assets. Some say this may mark a new era for a suite of investment vehicles investing in this new asset class. While the asset class may be “new”, the ETP investment vehicle, the market participants and the regulations that govern ETPs are not new.
This article was originally published January 26, 2024 on Westlaw Today.