ProFunds launched the Bitcoin Strategy ProFund at the end of July, the first of its kind publicly available mutual funds or ETFs in the U.S. to give investment results that correspond to bitcoin’s performance. The fund allows the incorporation of bitcoin exposure into a portfolio and eliminates the need for exchanges and crypto wallets by investing in bitcoin futures.
BTCFX should be the guidepost for the rash of bitcoin futures ETFs currently being filed with the SEC, as SEC Chair Gensler has indicated that a 1940 Act ETF investing in bitcoin futures would be looked upon favorably by the committee.
Before Gensler’s comments, almost every filing for cryptocurrency before the SEC was filed under the Securities Act of 1933, meaning they were being filed as commodities pools. All such filings fall under commodities pools with the ’33 Act, and not as an actual fund, and have fewer investor protections built-in. Filings under the Investment Company Act of 1940 are filed as funds, whether they are mutual funds, ETFs, closed-end funds, unit investment trusts, etc., with fairly rigorous investor protections. These protections include auditing requirements, financial disclosures, protections in case of fraud, and others.
One of the primary reasons for filing a ’33 Act is to avoid the tax headache of the K-1, particularly when futures contracts are involved. With a K-1, any gains from a futures contract present to the investor as if they were being sold to them, with the investor...
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