8 months ago
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Multiple issuers are vying for a spot Ethereum ETF following the successful launch of spot BTC products, but SEC delays and commissioner comments signal a difficult road ahead.
According to Reuters, the U.S. SEC and spot Ethereum (ETH) ETF applicants will reportedly meet next month to discuss bids for the Ether-based investment vehicles. At press time, the SEC’s public log does not indicate any meeting with issuers, but the publication cites two persons familiar with the matter as sources.
Decisions on spot Ether-based products were delayed until May at the earliest, with VanEck’s filing first in line. The SEC must accept or reject VanEck’s bid by May 23, while other issuers like BlackRock, Franklin Templeton Grayscale, and Invesco Galaxy await a reply.
Spot Ethereum ETF bids
Spot ETH ETF bids were filed last year shortly after issuers applied for spot Bitcoin ETFs. The SEC approved the Bitcoin (BTC) products, and nearly a dozen funds started trading on Jan. 11.
The approval came after over a decade of rejection by the securities watchdog, with the commission fielding market manipulation concerns as primary reasons for denial. The SEC also approved futures-based crypto products within that time, and this decision was found to be “arbitrary and capricious” by a three-judge panel, including Judge Neomi Rao.
The ruling issued during a Grayscale lawsuit against the SEC is regarded as a turning point in the long-standing battle to legitimize mass crypto adoption and investment in the U.S., as spot BTC ETFs were authorized a few months after.
However, experts have highlighted that spot ETH ETFs may receive a different review. One stark difference between Bitcoin and Ethereum is how the SEC views both products. Following spot BTC ETF approval, SEC chair Gary Gensler referred to Bitcoin as a non-security commodity, but the security designation of Ethereum remains ambiguous.
Furthermore, both blockchains run on divergent technological models. Bitcoin utilizes proof-of-work, and Ethereum transitioned to a proof-of-stake design in 2022. This model allows ETH holders to stake assets in exchange for yield, a process frequently scrutinized by the SEC and used as a lightning rod by the regulator to suggest that existing financial policies are sufficient for crypto-asset oversight.
Additionally, the SEC has not opened dialogue with issuers like the commission did in the run-up to spot BTC ETF approvals. Gensler has said that all five commissioners will vote on the bids but stressed that previous decisions do not indicate sweeping crypto endorsement.
Commissioner Hester Peirce remarked that the SEC shouldn’t need a court case to force its hand, while Grayscale CEO Michael Sonneshein said it’s too early to tell if the crypto investment company will have to sue the SEC again.
Crypto industry stakeholders like Coinbase have called for the SEC to greenlight Grayscale’s spot ETH ETF application, which seeks to convert a $7 billion trust into an exchange-traded fund. The crypto exchange also petitioned the SEC for more transparent crypto rules.
Amid efforts for an SEC nod toward Ether ETFs that track spot prices, ETH is up over 42% in the last 30 days per CoinMarketCap. Grayscale experts believe spot ETH ETF hype has contributed to this rally but pegged the increase to anticipation surrounding the Dencun upgrade.
Ethereum 30D chart | Source: CoinMarketCap
