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The SEC might reject the applications due to concerns about the underlying Ether market data.
Spot Bitcoin exchange-traded funds (ETFs) got the green light, but spot Ethereum ETFs might hit the red light. According to a Reuters report published today, sources familiar with recent meetings between ETF issuers and the SEC suggest the agency is likely to reject spot Ethereum ETFs during their final review next month.
The SEC’s decisions on VanEck’s and ARK’s filings are due May 23 and May 24, respectively. Unlike the discussions preceding the SEC’s approval of spot Bitcoin funds, recent talks have lacked substance, with SEC staff not engaging in detailed conversations about the proposed Ethereum ETFs, according to four people reportedly involved in the meetings with the SEC.
Sources also noted that despite ETF issuers’ arguments that the approved spot Bitcoin ETFs and Ethereum futures-based ETFs set a precedent, the SEC’s silence on specific concerns suggests a likely rejection.
The SEC’s approach to spot Ethereum ETF filings is sharply different from the past, where there was intensive and detailed dialogue before the SEC’s approval of spot bitcoin ETFs in January.
The SEC had historically rejected spot bitcoin ETFs over concerns about market manipulation. However, they were eventually compelled to approve them following a successful court challenge by Grayscale Investments.
In their previous comments, analysts at JPMorgan suggested that if the SEC denies the spot Ethereum filings, the ETF issuers may initiate legal lawsuits against the agency, which could end up forcing the SEC to review and eventually approve the trading of these products.
Due to the currently frustrating situation, VanEck CEO Jan van Eck expressed a similar expectation of denial. In his recent interview with CNBC, he said VanEck’s application and that of ARK Invest would be rejected first.
According to SEC records and sources familiar with the matter, the SEC has not had many meetings regarding the spot Ethereum ETF review. Of the few meetings, only one has been made public. This meeting was with Coinbase, concerning Grayscale’s bid to turn its Ethereum Trust into an ETF. Coinbase would act as the custodian for this ETF.
If the SEC were to reject Ethereum ETFs, applicants anticipate the reason would likely be broader issues, such as concerns about the quality and depth of market data regarding Ethereum.
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, one of the spot Ethereum ETF applicants, suggests that the SEC might want more time to study the Ethereum futures market before making a decision.
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