- Hester Peirce believes a court ruling is unnecessary for the approval of spot Ethereum-ETFs.
- The chances of product approval in May are estimated at 50-70%.
- SEC sources suggest that Chairman Gary Gensler may eventually relent and not obstruct the instrument’s registration.
Spot Ethereum-ETFs do not require a court ruling for approval, according to SEC Commissioner Hester Peirce in an interview with Coinage.
“We don’t need a court to declare our approach unreasonable and capricious [due to refusal of registration],” she stated.
Peirce was referring to the court decision regarding the conversion of Grayscale’s Bitcoin trust into an exchange-traded fund. The conclusion of this process preceded the approval of spot ETFs based on digital gold.
The commissioner noted that the SEC is likely to be influenced by the Grayscale precedent. She acknowledged that facts and circumstances vary significantly with each ETF application.
“A lot of work is required to prepare an exchange product for market launch, including ensuring that disclosures align with how the instrument actually operates,” she explained.
Timeline and Approval Chances for ETFs
Currently, proposals for launching spot Ethereum ETFs have been submitted by BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, and Hashdex. The SEC is expected to respond between May 23 and August 7.
Bloomberg analyst Eric Balchunas estimated the chances of product approval by May at 70%.
An expert noted that it is difficult to imagine a scenario where spot Bitcoin-ETFs are eventually approved, but spot Ethereum-ETFs are not.
Previously, Morgan Creek Capital CEO Mark Yusko estimated similar chances at less than 50%. The expert noted the SEC’s hostility towards the industry as a whole.
JPMorgan analyst Nikolaos Panigirtzoglou shares a similar view.
Analysts from investment bank TD Cowen also expressed doubt about the imminent registration of spot Ethereum-ETFs.
Prior to the approval of similar Bitcoin-based products, Gensler once again warned of the risks of the first cryptocurrency. In December, he indicated that “court decisions” influenced the agency’s approach to instruments.
Gensler May Abandon Opposition
FOX Business predicted the approval of spot Ethereum-ETFs by summer 2024. This will be preceded by a decision by the CFTC and SEC on recognizing the second-largest cryptocurrency by market capitalization as not a security.
Reporting on the timeline for a potential $ETH ETF approval has turned up a plethora of different takes from ETF issuers, investment management firms and sources close to the @SECGov.
✨One $BTC Spot ETF issuer with an ETH Spot ETF application says they’re confident the…
— Eleanor Terrett (@EleanorTerrett) January 23, 2024
Journalists suggested that such clarity might emerge during the legal proceedings with Binance. They referred to a recent hearing where it was noted that DAO tokens could be recognized as securities.
According to informed sources at FOX Business, the SEC currently says a “firm no” [to product registration]. There is “some internal resistance to this idea” at present.
Another source noted that the existence of futures ETFs on Ethereum and BlackRock’s track record with ETF application approvals suggest that “the instrument will launch by the end of summer.”
He referred to the absence of a CFTC interpretation of the second-largest cryptocurrency as an investment contract and Ripple’s partial victory regarding XRP’s status.
“It will be difficult for Gensler to argue that most digital assets are securities,” he explained.
FOX Business concluded that in the coming months, SEC staff may delve into the examination of S-1 applications, as they did with proposals for launching spot Bitcoin-ETFs. This would signal a positive decision in the future.
Previously, BlackRock CEO Larry Fink stated that he “sees value” in a spot Ethereum fund, calling it a step towards tokenization.