- Ethereum spot ETFs will likely be denied on May 23.
- Prospective issuers probably won’t sue the SEC — even though the strategy worked to get Bitcoin ETFs out.
- The US election may hold the key to an approval.
The Securities and Exchange Commission will probably deny applications for Ethereum spot exchange-traded funds on May 23.
The lack of meaningful interaction with prospective issuers, coupled with Ethereum’s ambiguous regulatory status, have made analysts pessimistic about the chances.
Not to mention the SEC’s recent investigation into the Ethereum Foundation.
That means spot Ethereum ETFs probably won’t see the light until the end of 2025, Bloomberg Intelligence ETF analyst Eric Balchunas told DL News.
Faced with a rejection, prospective ETF issuers — like BlackRock, Fidelity, or Ark Invest — have two options: either sue the SEC like Grayscale did for the Bitcoin spot ETFs, or file again at a later date.
Factoring into the equation is the US election. Should former President Donald Trump win a second term in the White House, the SEC is likely to face a change of leadership. And a new chair could be friendlier towards crypto than Gary Gensler.
“If there’s a new president, you file again,” Balchunas said. “Maybe you get approved. Or you sue. Either way, that will take a whole other year to play out.”
Suing the SEC
The SEC spent years shooting down Bitcoin spot ETF applications before Grayscale filed a lawsuit against the regulator in protest in 2022.
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In September, a judge found that the SEC had acted in an “arbitrary and capricious” manner by denying the applications. Four months later, the Bitcoin ETFs were launched.
Still, it’s unlikely that the strategy will be replicated for Ethereum ETFs. For one, Grayscale will probably not bring the fire to the SEC a second time, Balchunas told DL News.
Lawsuits are expensive — not just in terms of money, but in attention and bandwidth too. And after suffering massive outflows when its Bitcoin trust was converted into an ETF, it wouldn’t be surprising if Grayscale did not aggressively pursue a conversion of its Ethereum trust.
Other prospective issuers, meanwhile, won’t dare pick up the baton and sue the regulator themselves, Balchunas said.
“None of these other firms want to piss off the SEC,” Balchunas said. “Grayscale was unique in that it wasn’t a big ETF issuer. The rest of these firms have other things going on, and they’re more scared.” “Nobody else will step up,” he added.
Election time
And why sue the SEC when the US presidential election, slated this November, may solve the problem?
With Trump leading in some polls, the odds that a new SEC chair will be appointed are higher than previously expected.
“Trump is not necessarily pro-crypto,” Balchunas said. “Remember his previous SEC chief Jay Clayton didn’t allow that ETF either. So he’s not going to be like, ‘let’s just go crazy.’ But he’ll probably still be better for crypto and spot ETFs.”
Assuming a new chair is appointed in April or May, and filings submitted immediately afterwards, that could bring the deadline for approval or rejection to somewhere around December 2025.
Alternatively, issuers could try to file as soon as the election is over — or even before results are in — to speed up the timeline.
And if Joe Biden wins?
“In the past cycles, when they denied spot Bitcoin ETFs, there was usually a cooling off period for like a year where nobody did anything,” Balchunas said. “And then out of the blue someone is like, ‘Oh, the hell with it’ and files again.”
“My guess is that issuers will take the summer, lick their wounds, just be bummed, and then see what happens in the election,” he added.
Tom Carreras is a markets correspondent for DL News. Got a tip about Ethereum ETFs? Reach out at tcarreras@dlnews.com
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