Canary Capital’s groundbreaking TRUMP fund proposal faces serious regulatory scrutiny as ETF analysts question its compliance with established market requirements. The fund’s unique approach to holding President Donald Trump’s memecoin directly raises fundamental questions about cryptocurrency ETF viability.
TRUMP Fund Regulatory Challenges Emerge
Bloomberg ETF analyst Eric Balchunas publicly questioned the TRUMP fund’s regulatory pathway. Specifically, he highlighted that exchange-traded funds typically require a futures product trading on regulated exchanges for at least six months. Consequently, this requirement presents a significant obstacle for Canary’s proposal.
Balchunas noted the apparent absence of such futures products for the TRUMP token. However, he suggested alternative pathways under the Investment Company Act of 1940. This regulatory framework, known as “40 Act” funds, offers different compliance requirements compared to traditional ETF structures.
Alternative Regulatory Pathway Explored
REX Shares previously utilized the 40 Act approach for its Solana staking ETF. Similarly, REX has filed for its own TRUMP tracking fund using this method. Essentially, this strategy involves purchasing shares in offshore companies holding the underlying cryptocurrency.
ETF Store president Nate Geraci described this approach as “a regulatory end-around.” Meanwhile, the TRUMP token itself has generated controversy since its January launch. Critics argue the token could potentially enable anonymous influence purchases while raising conflict of interest concerns.
Market Performance and Investment Risks
The Official Trump token currently ranks 55th by market value after experiencing significant volatility. It has declined 69% from its January 19 all-time high of $46.50. At publication time, TRUMP trades at $8.40 according to CoinMarketCap data.
Canary’s filing explicitly warns investors about the speculative nature of this investment. The document states shareholders must accept more risk than traditional exchange-traded products. Additionally, REX Financial CEO Greg King recently cautioned ETF issuers about cryptocurrency selection criteria.
Industry Experts Express Concerns
King warned that the cryptocurrency market “gets pretty sketchy below the top 10, certainly below the top 20.” This commentary highlights broader industry concerns about altcoin ETF viability. Meanwhile, Canary established the legal entity for its Trump coin ETF with the Delaware State Department on August 14.
The regulatory process typically requires nearly a year for completion. Canary must submit additional paperwork before undergoing the SEC’s standard approval process. This timeline suggests investors shouldn’t expect immediate TRUMP fund availability.
FAQs About the TRUMP Fund Proposal
What makes the TRUMP fund different from other cryptocurrency ETFs?
The TRUMP fund proposes direct token ownership rather than futures contracts, requiring alternative regulatory pathways under the 40 Act.
Why are analysts questioning the fund’s regulatory viability?
Traditional ETFs require six months of futures trading history, which doesn’t currently exist for the TRUMP token.
How does the 40 Act provide a potential solution?
This legislation allows different regulatory requirements than standard ETF frameworks, enabling alternative compliance strategies.
What risks does Canary’s filing acknowledge?
The filing explicitly states the fund represents speculative securities unsuitable for risk-averse investors.
Are other companies pursuing similar TRUMP funds?
Yes, REX Shares has also filed for a TRUMP tracking ETF using the same 40 Act regulatory approach.
What is the current status of the TRUMP token?
The token ranks 55th by market capitalization and has declined significantly from its January all-time high.
