ETFs May Encounter Approval Delays and Volatility if US Government Shuts Down, According to Reuters

By Bansari Mayur Kamdar

Approvals for new exchange-traded funds (ETFs), including those focused on bitcoin, may experience delays if the U.S. government undergoes a shutdown next month for the fourth time in the past ten years.

Should Congress fail to secure funding for the new fiscal year beginning on October 1, hundreds of thousands of federal employees—including nearly 90% of the Securities and Exchange Commission’s (SEC) 4,600 staff—would be furloughed without pay.

SEC Chair Gary Gensler recently indicated in a media interview that the agency would operate with a "skeletal" staff during any government shutdown.

"I’m not certain that the ETFs currently awaiting approval can proceed in the event of a government shutdown," commented Todd Rosenbluth, head of research at VettaFi. "The SEC must reject new ETF applications, and a lack of personnel could halt launches."

The SEC has already postponed its decision on whether to approve applications for spot ETFs to mid-October. However, this timeline could face further delays if the shutdown persists.

"This would further postpone the ongoing deliberation regarding spot bitcoin ETFs," noted Todd Sohn, an ETF and technical strategist at Strategas Securities. "Investor and issuer patience is likely wearing thin concerning this product, so a shutdown would only increase their frustration."

Additionally, analysts cautioned that listed funds could experience heightened volatility during this period.

"ETFs serve as pass-through vehicles; therefore, fluctuations in the underlying markets will naturally affect ETFs," explained Hector McNeil, co-CEO and founder of HANetf. "There is a good chance people may choose to delay launching new ETFs and wait for more stable conditions."