Canary TRUMP Fund Faces Hurdles as ETF Approval Process Is Unclear

TLDR

• Canary Capital has filed for an ETF that will directly hold the Trump Coin token.
• ETF analysts are questioning whether the Canary TRUMP fund will pass through regulatory approval.
• The fund’s approval could be challenged by the lack of a futures product for the Trump Coin token.
• Canary Capital may use the Investment Company Act of 1940 to navigate regulatory requirements.
• The Trump Coin token has seen a 69% drop in value since its all-time high in January.

Canary Capital has filed for an exchange-traded fund (ETF) that would directly hold and offer exposure to the Trump Coin token. The move comes after Trump launched the token in January, a few days before his re-entry into the White House. The Canary TRUMP fund could face significant regulatory challenges, as some analysts have raised concerns about how it will pass through the SEC approval process.

Canary TRUMP Fund Faces Scrutiny Over Regulatory Hurdles

Canary Capital has made a filing with the Securities and Exchange Commission (SEC) for its Canary TRUMP fund. This fund will buy and hold the Official Trump Coin token, which has faced scrutiny since its January launch. While the proposal has generated significant attention, the approval process remains unclear.

ETF analysts like Eric Balchunas have questioned whether the fund will clear regulatory hurdles. He pointed out that ETFs generally need a futures product on an exchange for at least six months.

The ETF would be an innovative product, but it also carries certain risks. Canary noted in its filing that it may not be suitable for investors who cannot accept the risks involved. The token’s speculative nature is central to the concern, as its market value has already fallen sharply by 69% since its peak.

Legal Structure Could Be a Regulatory Workaround for the Canary TRUMP Fund

The filing from Canary Capital outlines the possibility of using the Investment Company Act of 1940, also known as the “40 Act.” This approach could bypass some usual regulatory requirements that crypto ETFs typically face. Under this structure, the fund would buy shares in an offshore company that holds the Trump Coin token.

REX Shares has filed a similar fund that tracks the Trump Coin token. This fund follows the same legal structure under the 40 Act and provides a potential regulatory workaround. However, industry experts like ETF Store president Nate Geraci warn that this approach could face more scrutiny from regulators.

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