Spot Ethereum ETFs Approval Odds Jump on SEC Moves

Spot Ethereum ETFs Approval Odds Jump on SEC Moves

SEC is to decide whether or not to permit the funds Thursday, and watchers say approval odds have turned positive.

ETF.com
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Contributing Editor
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Reviewed by: etf.com Staff
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Edited by: Ron Day

The Securities and Exchange Commission has asked potential issuers of spot Ethereum exchange-traded funds to amend key filings, according to multiple reports, representing a shift in the agency's communications with the applicants and possibly signaling increased likelihood of the products approval. 

Meanwhile the cryptocurrency has soared 20% in the past 24 hours, according to Coinmarketcap.com, as sentiment that the Ethereum ETFs would be approved now appears lean positive after looking doubtful for months.

The SEC request comes two days before the agency, which in January approved trading of spot bitcoin ETFs, is scheduled to decide on an application by ETF giant VanEck. The form in question, so-called 19b-4, outlines rules changes related to trading that address investor protections and regulatory oversight. 

"This was a shock, a 'holy sht,' moment yesterday even for ppl inside the process," Bloomberg Senior ETF Analyst Eric Balchunas wrote in a post on Twitter/X. 

The SEC had been widely expected to reject the VanEck proposal on Thursday and an ARK Investment proposal with 21 Shares a day later. The products depend primarily on the ongoing price of ether, the native cryptocurrency of the smart contracts Ethereum blockchain and second largest digital asset behind bitcoin in market value. 

Yet the agency has hesitated to approve the spot Ethereum ETFs over concerns about market manipulation and fraud, which agency Chairman Gary Gensler has argued plage digital assets, and which presented an obstacle before the Jan. 10 approval of 10 spot bitcoin ETFs (an 11th fund subsequently started trading in March. Those funds have generated almost $13 billion in inflows in slightly more than four months. 

Amid the latest developments, ether was recently trading near $3,800. Bitcoin was up about 3.8% over the same period to change hands near $70,000. Both cryptocurrencies had been sagging for much of the spring. 

Balchunas and Bloomberg Analyst James Seyffart this week boosted their odds that the spot Ethereum ETFs will garner SEC approval to 75% from 25%, tweeting yesterday they were "hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue)." 

10 Spot Ethereum Applications

The SEC is currently weighing 10 applications for spot Ethereum ETFs, including a proposed Grayscale conversion from a trust, and proposals from BlackRock and Fidelity. Those three companies have the largest spot bitcoin products by assets under management. The spot bitcoin ETFs won approval Jan. 10 after a lengthy application process during which the SEC had similar concerns to its current Ethereum-related ones. 

The SEC must approve the 19b-4s and an S-1 registration statement for the ETFs to start trading. "Technically possible for SEC to approve 19b-4s & then slow play S-1s (especially given reported lack of engagement here)," Nate Geraci, president of the ETFStore, wrote in an X post on Sunday. 

He noted on Monday that "you never know what (the) SEC will do (& they still haven't approved anything)."

On Tuesday, Fidelity updated an S-1 filing indicating that it would eliminate staking rewards from its proposed spot Ethereum fund. 

The SEC hasn't responded to an etf.com request for comment.

James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies. 

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai. 

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.