On 5 May 2025, the United States Securities and Exchange Commission (US SEC) published an ‘order instituting proceedings’ to determine whether to approve or disapprove a proposed rule change submitted by the Nasdaq Stock Market LLC to list and trade shares of the Canary Litecoin ETF under Nasdaq Rule 5711(d), governing Commodity-Based Trust Shares. The application, originally filed on 15 January 2025, proposes that the ETF will track the market price of Litecoin (LTC) through the CoinDesk Litecoin Price Index (LTX) and hold LTC as its sole underlying asset, alongside cash.
According to the proposal, the Litecoin ETF is sponsored by Canary Capital Group LLC and administered by U.S. Bancorp Fund Services, LLC and purportedly it will allow investors to gain regulated exposure to the price performance of Litecoin without directly acquiring or custodying the digital asset. The Litecoin will be securely custodied by BitGo Trust Company, Inc. and Coinbase Custody Trust Company, LLC. The shares will be issued and redeemed in blocks of 10,000 units, settled in cash.
US SEC has not yet reached a decision, and to do that US SEC has instead initiated proceedings under Section 19(b)(2)(B) of the United States Securities Exchange Act of 1934 to further evaluate the rule change. The US SEC expressed the need for additional scrutiny on whether the proposed Litecoin ETF is consistent with the requirements of Section 6(b)(5) of the United States Securities Exchange Act of 1934 to, particularly the obligations that exchange rules must be designed to prevent fraudulent and manipulative practices and protect investors and the public interest.
US SEC is seeking public comment on whether the Nasdaq’s proposal sufficiently addresses concerns about market integrity, price manipulation, and adequate surveillance sharing arrangements. The US SEC noted that while Litecoin shares some commonalities with previously reviewed digital assets, including Bitcoin, it may present novel market structure risks or liquidity concerns that warrant further examination.
Interested parties are invited to submit written comments to the US SEC within 21 days of publication in the Federal Register, with rebuttals due within 35 days. Submissions can be made electronically via the SEC’s website or emailed directly to rule-comments@sec.gov, referencing File No. SR-NASDAQ-2025-005. The Commission has also noted that, while an oral hearing is not currently scheduled, requests for such a proceeding will be considered in accordance with Rule 19b-4.
(Source: https://www.sec.gov/files/rules/sro/nasdaq/2025/34-102988.pdf)
