The move comes as exchanges scramble to respond to a seemingly dramatic U.S. Securities and Exchange Commission (SEC) shift in the direction of potentially approving a spot Ethereum ETF.
According to people familiar with the matter, the SEC's trading and market division contacted major exchanges on Monday to inform them that it would approve 19b-4 applications this week. At the same time, Barron's also cited internal sources as reporting that SEC staff told exchanges on Monday that they were inclined to approve the plans.
The shift is in stark contrast to the SEC’s attitude to issuers two weeks ago, when the agency seemed to have little interest in the documents. “This is unprecedented, and it suggests there may be political factors behind it,” said a person familiar with the matter.
The SEC’s Division of Corporation Finance, which oversees S-1 filings, appears to be at odds with the Division of Trading and Markets, which is responsible for approving 19b-4s, while the Division of Corporation Finance is responsible for S-1s.
“There has been no coordination within the SEC on this, so this could be a political decision,” said a person familiar with the matter.
With the election approaching, some sources speculated that the SEC's shift could be politically motivated. Over the past month, former President Trump has publicly expressed support for cryptocurrencies and even linked them to his campaign issues, fueling speculation about the political factors behind the SEC's decision.
Meanwhile, Ji Kim, chief legal and policy officer at the Crypto Innovation Council, said: “Lawmakers have heard from voters that cryptocurrency is not only important but critical, and they want to see clear regulation in this space.” Kim also pointed out that a national poll showed that cryptocurrency voters could become a key swing voting group.
Next, exchanges will need to update Form 19b-4 based on the SEC’s comments. Given the tight timeline, comments on Form 19b-4 are expected to be very limited. One source described the SEC’s work as “like writing a term paper the night before.”
However, not everyone thinks the SEC will suddenly change its mind about spot Ethereum ETFs. Nathan Geraci, president of ETF Store, pointed out in an email that if the SEC wanted to define Ethereum or reject its ETF for other reasons, the best time would have been when it approved the Ethereum futures ETF before October last year. "But they didn't do that." Geraci said that the SEC had previously approved the Ethereum futures ETF, which may have laid the foundation for the approval of the spot Ethereum ETF.
Geraci also mentioned that the SEC had already done a lot of work on the key language in the 19b-4 and S-1 filings for the spot Ethereum ETF when it approved the spot Bitcoin ETF. Therefore, the SEC may now be more inclined to engage with exchanges and issuers at the last minute to complete the approval process.
