With anticipation surrounding the potential approval of Ether exchange-traded funds (ETFs) in May, sentiments vary among analysts and investors. Bloomberg analysts suggest the likelihood of spot Ether ETF approval in May has diminished, citing regulatory concerns.
Anticipation is high as the SEC prepares to decide, yet uncertainty lingers regarding regulatory clarity and market reactions.
Ether ETFs stand to miss the predicted timeline
According to a Bloomberg ETF analyst, the likelihood that spot ether ETFs will be approved in May has decreased. The analyst cites the apparent absence of involvement of U.S. regulators with potential issuers regarding these products.
James Seyffart, an analyst for the Bloomberg Intelligence ETF funds, wrote on X on Tuesday, “We now believe these will ultimately be denied on May 23 for this round.” In May, Seyffart and his colleague Eric Balchunas had previously estimated the likelihood of approval at 35%.
My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round. The SEC hasn't engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5
— James Seyffart (@JSeyff) March 19, 2024
Having previously delayed a decision regarding an exchange-traded fund that trades spot ether, the Securities and Exchange Commission will now be obligated to render a decision by May 23, as that date represents the ultimate straw for one of the applicants.
Seven issuers, including BlackRock, Fidelity, Invesco with Galaxy, Grayscale, VanEck, 21Shares with Ark, and Hashdex, are presently expressing interest in launching an ether fund.
Seyffart observed that the SEC and issuers regarding the spot ether ETF have not engaged in a lengthy back-and-forth, in contrast to the exhaustive deliberations that occurred prior to the January approval of spot bitcoin ETFs.
Crypto ETFs struggle for recognition and survival
Chairman Gary Gensler stated in a January statement that the SEC’s approval of spot bitcoin ETF products was “congruent with ETPs holding a single non-security commodity, bitcoin.”
Gensler further stated that the approval represented “the most sustainable course of action” due, in part, to the SEC’s August court loss to Grayscale Investments.
During a panel discussion on Tuesday in London, Grayscale CEO Michael Sonnenshein stated that the litigation hinged on the “inextricable tie” between the spot market and the regulated bitcoin futures market.
The argument was that since the SEC had approved bitcoin futures ETFs, it was unjust to deny spot BTC products. In the past ten weeks, ten spot bitcoin ETFs have been traded on US markets following Grayscale’s legal victory.
In October, the US securities regulator authorized trading in ether futures ETFs; this is a fact cited by a number of industry observers who contend spot ether ETFs are inevitable.
Similar to the bitcoin futures ETFs, these funds contain futures contracts that are traded on the Commodity Futures Trading Commission-regulated Chicago Mercantile Exchange (CME).
A number of industry executives expressed their views prior to a crypto report that disclosed the SEC had issued subpoenas to multiple US companies in connection with their transactions with the Ethereum Foundation, an organization responsible for supervising the Ethereum blockchain.
However, the potential investigation has reignited a longstanding inquiry: Is it a commodity or a security? Segment observers have noted that this inquiry would influence the SEC’s approach to its regulation of ether ETFs.
Paul Grewal, chief legal officer of Coinbase, stated in a series of X posts that the SEC “has no good reason” to deny the spot ether ETF applications.
Ex. E. The Howey test doesn’t determine ETH’s status, and as we have explained in depth in other proceedings, digital assets like ETH that do not involve an ongoing contractual obligation related to a business enterprise are not “investment contracts” or otherwise “securities.”…
— paulgrewal.eth (@iampaulgrewal) March 20, 2024
“And we hope they won’t try to invent one by questioning the long established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better.”
