Though REX and Osprey did not launch the dogecoin ETF under the new ruleset, instead taking an alternative route involving separate legal provisions to ensure it won the race to market, analysts expect the SEC’s new listing standards to tee up a proliferation of crypto ETFs in the US. Under the ruleset, any crypto coin already listed on a market—like Coinbase Derivatives—that participates in the Intermarket Surveillance Group, a network of organizations that monitors for fraudulent activity, would automatically qualify for the ETF treatment.
“It’s a spaghetti cannon. They’re going to cook up all these ETFs—whether levered versions, inverse, or pure spot exposure—and they’re going to frickin shoot this cannon at the wall and see what sticks,” says Seyffart. “That’s what these ETF issuers do.”
Before the approval of bitcoin ETFs in 2024, proponents argued that they would create a valuable avenue for both laypeople and financial institutions to invest through a regulated vehicle in an asset marketed as a digital equivalent to gold, a hedge against inflation, and so on.
Whatever the merits of the bitcoin investment case, the argument for memecoins is shakier. Typically modelled after a celebrity or popular internet reference, memecoins generate no revenue or cash flow, so their price depends entirely on caprices of the public mood and the vibes among investors. In the case of dogecoin, the supply of coins is even periodically diluted. “With a memecoin, it would be hard for a financial adviser to feel comfortable buying that for a client,” says Armour.
One’s stance on the prospect of memecoin ETFs coming to market in droves might depend on personal politics.
“I’m very much libertarian in the way the SEC should be operating … The SEC’s job is not to be a merit regulator. Its job is to be a disclosure regulator,” says Seyffart. “I personally don’t own or trade any memecoins and probably won’t own any memecoin ETFs. But it’s a free market. People can do what they want.”
Others, including Armour, believe it’s the joint responsibility of regulators, issuers, and investors to ensure that public markets aren’t polluted with assets likely to inflict large and sudden losses.
“Does the SEC approving putting it into an ETF make people who don’t know what these things are think they are more legitimate?” asks Armour. “It pulls more attention and assets toward speculation, which typically is not a good long-term strategy for investors,” he claims.
The SEC declined to comment.
In King’s opinion, moralizing over which assets should and should not be stuffed into an ETF is besides the point; the government has defined what is permitted. REX and Osprey “primarily view it as providing access to investments that already exist,” says King. “[If there’s] investor demand, it’s something we’ll consider launching.”
In January, REX and Osprey filed for permission to launch ETFs for a variety of other crypto coins, among them a memecoin promoted by Trump. The TRUMP memecoin has been roundly condemned by critics as an unethical money-grab that opens up a potential vector for bribery.
“We just play by the rules,” says King. “The lines have been drawn … by the administration.”
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