With Vanguard Group's patent regarding ETF share classes of mutual funds now expired and other issuers interested in bringing similar structures to market, Deborah Fuhr, who moderated a panel at the Exchange ETF conference in Miami Beach, Fla., asked about the potential for legal action ahead.
Given that Vanguard is currently the only firm allowed to offer such a structure, "are we likely to see someone also go down a legal path of saying why is Vanguard the only one able to do this now," asked Fuhr, managing partner and founder of ETFGI, during the panel "Hot Regulatory Topics Facing the ETF Industry."
"That's a very good question," replied Jeremy Senderowicz, a shareholder at law firm Vedder Price, adding that "if the SEC digs its heels in, certainly people might be emboldened by the success that Grayscale had last year."
In August 2023, a federal appeals court ruled in favor of Grayscale Investments in its closely watched case against the SEC over the regulator's denial of an application to convert the Grayscale Bitcoin Trust to a spot bitcoin ETF. In its opinion, the court said the SEC had failed to explain adequately why it had approved the listing of two bitcoin futures exchange-traded products but not Grayscale's proposed bitcoin ETP.
Still, "there are some distinguishing factors," Senderowicz said.
"Quite unlike what the SEC did in allowing bitcoin futures products in 2021 … it has been 20 years since the SEC approved this structure from anyone," he said. "So, at the very least, they have somewhat of a more consistent record of not approving it for other people."