Kelly Intelligence Plans Ethereum Futures ETF

Kelly Intelligence is looking to launch an Ethereum futures ETF a little more than a month after the first bitcoin futures ETFs hit the US market. 

The Denver-based firm’s proposed actively managed fund would invest in cash-settled ether futures contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), according to a regulatory disclosure filed on Monday.  

The only such exchange to offer these contracts is the Chicago Mercantile Exchange (CME), which rolled out ether futures contracts earlier this year after unveiling bitcoin futures contracts in December 2017. 

CME earlier this month announced that it would add micro ether futures — sized at one-tenth of one ether — on Dec. 6. 

CME Group executives said at the time that the micro ether futures offering would provide an efficient, cost-effective way for individual and institutional investors to hedge their ether price risk or more nimbly execute ether trading strategies. The plans came as liquidity in ether futures contracts has steadily grown among institutional traders since their launch in February, the CME leaders added.

“Kelly Intelligence’s interest in ether is predicated on the fact that we are at the start of the fourth industrial revolution – what we call the intelligence revolution — where the Ethereum network will be an integral part of our lives going forward,” Kevin Kelly, the firm’s founder and CEO, told Blockworks in an email.

Kelly declined to comment specifically on the filing or potential conversations the firm has had with regulators. 

The planned Kelly Ethereum Ether Strategy ETF may replace futures contracts approaching expiration with similar contracts that have a later expiration, the filing notes.

In addition to ether futures contracts, the fund may invest in pooled investment vehicles and exchange-traded products that provide exposure to ether. It would not invest in ether or other digital assets directly.

Penserra Capital Management is slated to subadvise the fund. The filing does not indicate an expense ratio for the proposed offering.

Bitcoin futures ETFs

The filing follows the launch of several bitcoin futures ETFs. The first of which, the ProShares Bitcoin Strategy ETF (BITO), has grown to roughly $1.4 billion in assets under management since its Oct. 19 debut. The US Securities and Exchange Commission (SEC) has not yet greenlit ETFs that would invest in bitcoin directly.

VanEck and ProShares had revealed plans in August to launch Ethereum futures products but subsequently withdrew the applications. Some industry professionals said at the time that the SEC likely told the issuers that such products would not be approved any time soon.

Trey Griggs, CEO for GSR’s US business, told Blockworks last month that he believed Ethereum had sufficient trading history for the SEC to approve a futures-based product. But the market for ether futures is likely not liquid enough to support the volume of inflows that an ETF could trigger, Noelle Acheson, head of market insights at Genesis, said at the time. 

Bloomberg Intelligence ETF Analyst James Seyffart said in October that an Ethereum futures-based ETF could launch sometime in the first half of 2022, noting that he believes one will launch before a spot bitcoin ETF.