SEC Likely to Reject Ethereum ETF Applications, Say Reports

Asset managers and other firms anticipate that the U.S. Securities and Exchange Commission (SEC) will reject applications for spot Ethereum ETFs following “disappointing” discussions, according to Reuters.

Sources indicate that during infrequent meetings with the SEC, issuers argued that the Ethereum futures ETFs approved in October 2023 set a precedent for spot products.

Regulatory staff listened to the arguments but refrained from commenting or asking questions. Due to the lack of constructive dialogue, insiders speculated that the current applications would be denied.

“It seems approval [of spot ETH-ETFs] will be delayed until the end of 2024 or longer. The regulatory landscape remains murky,” emphasized Todd Rosenbluth, VettaFi’s chief exchange analyst.

Some issuers noted that they still plan to submit additional disclosure documents to the SEC and continue discussions.

According to OKX President Hong Fang, the anticipated rejection of applications negatively impacts ETH prices. Nevertheless, the asset has risen 39% since the beginning of the year, he added.

At the time of writing, the second-largest cryptocurrency by market capitalization is trading at $3125.

According to sources and SEC reports, the regulator has held only a few meetings regarding Ethereum funds. The only publicly announced meeting involved discussions with Coinbase and Grayscale.

If the agency indeed rejects the ETH-ETF, some issuers suggested it would be due to “general issues such as the nature and depth of statistical data on the Ethereum market.”

Bitwise’s Chief Investment Officer Matt Hougan believes the SEC might cite limited observation time for Ethereum futures funds.

“It’s quite possible that we will eventually see an Ethereum-ETF. But not before someone is denied and takes the matter to court,” added one of Reuters’ anonymous sources.

On April 23, the SEC postponed its decision on Franklin Templeton’s fund, setting a deadline of June 11. Prior to this, the regulator extended the review period for a similar application from BlackRock.

Earlier, investment bank Standard Chartered revised its optimistic forecast regarding spot Ethereum-ETFs and now doubts that the SEC will approve the instrument in May.