SEC Remains Silent on Spot ETH ETFs: Analyst Weighs In

The Securities and Exchange Commission’s (SEC) apparent lack of communication regarding Ether (ETH) exchange-traded funds (ETFs) has sparked concerns among hopeful issuers anticipating approvals by May. 

Bloomberg ETF analyst Eric Balchunas revealed that he has downgraded the likelihood of Ether ETF approval to a mere 35%.

Recently, Grayscale Investments and Coinbase engaged in discussions with the SEC regarding the approval of a spot ETH ETF, signifying another step forward in the companies’ efforts to introduce an investment vehicle that would track the price movements of Ethereum. 

While the crypto industry saw this meeting as a positive sign, Balchunas and VB Capital’s Scott Johnsson expressed caution, emphasizing that the meeting primarily focused on analytics and correlation analysis rather than being between prospective fund issuers.

Absence of Communication from the SEC

The primary cause of this downgrade, according to Balchunas, is the conspicuous absence of any communication or comments from the SEC to issuers, just 73 days away from the final deadline. The SEC typically provides feedback, and issuers must address any concerns, possibly leading to refiling and additional meetings, making the approval process lengthy.

Balchunas shared insider information suggesting that the SEC might intentionally be giving the silent treatment to fund issuers. 

Gary Gensler’s Views are a Potential Hurdle

He also noted SEC Chair Gary Gensler’s stance on Ether as a potential hurdle. Gensler, who views Ether as a security, may be reluctant to face political backlash similar to what followed the approval of spot Bitcoin ETFs and the SEC’s court loss to Grayscale in August 2023.

The analyst believes that Gensler may perceive his previous actions as throwing the industry a bone, and he might not be inclined to approve Ether unless he considers it a commodity like Bitcoin. All these factors contribute to a growing skepticism surrounding ETH ETF approvals.

Lack of Optimism for Spot ETH ETF

Balchunas described the current situation as feeling off, comparing it to the reverse of the positive sentiment during the spot Bitcoin ETF race. While acknowledging this as a personal judgment, he emphasized its significance in influencing his outlook on the approval odds.

Some industry experts share the sentiment that the SEC’s behavior is peculiar. ETF Store president Nate Geraci questioned the SEC’s decision to approve ETH futures ETFs in October but not spot products in May, highlighting the lack of explanation for such inconsistencies.

SEC Might Deny Spot ETH ETF

On the flip side, Consensys’ General Counsel, Matt Corva, sees a potential denial of an ETH ETF as a positive long-term development. He suggests that if ETH faces rejection, other coins might lose political leverage, creating a more level playing field.

If the SEC rejects all pending Ethereum ETF applications, Balchunas points to November 5, the United States Presidential election day, as a crucial date to watch. The outcome could potentially influence changes in leadership, impacting the SEC’s approach to cryptocurrency ETFs.