SEC Approval of Spot Ether ETFs Hinges on Issuer Responsiveness, Says Gensler

The approval of United States spot Ether exchange-traded funds (ETFs) is now dependent on how swiftly issuers can address comments from the Securities and Exchange Commission (SEC), according to SEC Chairman Gary Gensler.

His remarks indicate that the onus for these approvals lies with the issuers and suggest that the SEC will not unduly prolong the process, contrary to community’s concerns.

Recent Approvals by the SEC

On May 23, the SEC approved eight 19b-4 filings to list spot Ether ETFs on various U.S. exchanges. However, these ETFs cannot start trading until they receive the required S-1 registration statement approvals.

“These registrants are self-motivated to be responsive to the comments they get, but it’s really up to them how responsive they are,” Gensler told Reuters on June 6. This clarifies his earlier comments on CNBC, where he mentioned that the next steps would “take some time,” which had led some to believe the SEC might delay signing off on the S-1 Forms.

Bloomberg ETF analyst Eric Balchunas has previously suggested that the process could span weeks or months, although he has forecasted the first week of July as a probable timeline for the initial approvals.

Influence of Grayscale’s Legal Challenge on the SEC

The SEC has not yet provided a clear explanation for its apparent change in stance on spot Ether ETFs just days before the initial decision deadline. However, he hinted to Reuters that the SEC’s shift might have been influenced by Grayscale’s legal challenge regarding its Bitcoin ETF. Grayscale argued successfully in court that since the SEC had approved Bitcoin futures ETFs, there was no justification for denying spot Bitcoin ETFs. This argument played a crucial role in the subsequent approvals.

Gensler pointed out that Ethereum’s case bore similarities, stating that the SEC staff “looked at these [Ether] filings, looked at the various correlations… the correlations are relatively similar to the correlations in the Bitcoin space.”

Alternative Theories and Political Influence

Bloomberg ETF analyst James Seyffart, who had previously predicted a low likelihood of Ether ETF approvals, shared an alternate theory. Speaking on the Bits+Bips podcast with Unchained, Seyffart suggested that the reversal on Ether ETFs might have been influenced by SEC Commissioner Jamie Lizárraga, who has connections to Nancy Pelosi, a prominent Democratic Party member.

“What I heard from other people was that this could have come from Lizárraga, who spent a very long time working as Nancy Pelosi’s right-hand man,” said the analyst. He added that concerns among Democrats in the Senate and the House regarding crypto polling and ownership might have played a role in the decision.

Nancy Pelosi has been a notable supporter of the Financial Innovation and Technology for the 21st Century Act (FIT21) crypto bill, which was passed by the U.S. House of Representatives on May 22. This bill signals increased legislative support and potentially influences the SEC’s decision-making process.