Understanding the SEC’s stance: why spot Ethereum ETFs face potential denial


The world of cryptocurrency has been buzzing with anticipation as financial firms eagerly await the approval of spot exchange-traded funds (ETFs) linked to Ethereum, the second-largest cryptocurrency by market value. However, recent reports suggest that the U.S. Securities and Exchange Commission (SEC) may not be ready to give the green light just yet.

The SEC’s stance on Ethereum ETFs

According to a recent Reuters report, the SEC is expected to deny applications for spot Ethereum ETFs following discouraging meetings with issuers. Despite efforts from prominent firms like VanEck and ARK Investment Management, the outlook for spot Ethereum ETF approval in May appears bleak.

Filings and deadlines

VanEck, ARK Investment Management, and seven other issuers have submitted filings to list spot Ethereum ETFs with the SEC. Among these, VanEck’s and ARK’s filings are the first in line, with decisions expected by May 23 and May 24 respectively. However, the recent interactions between issuers and the SEC have left many feeling disheartened.

Lack of engagement

Reports indicate that the meetings between issuers and the SEC have been one-sided, with agency staff failing to engage in substantive discussions about the proposed products. This lack of engagement stands in stark contrast to the thorough deliberations that preceded the approval of spot Bitcoin ETFs earlier in January.

Concerns and speculations

The absence of specific concerns or inquiries from SEC staff during the meetings has fueled speculation that the filings are likely to be rejected. While the SEC’s rejection of spot Bitcoin ETFs in the past was rooted in concerns about market manipulation, the agency’s silence on Ethereum ETFs raises questions about its underlying motivations.

Historical precedent

It’s worth noting that despite initial rejections, spot Bitcoin ETFs ultimately gained approval after Grayscale Investments successfully challenged the SEC in court. This victory underscored the similarities between the proposed spot Bitcoin ETFs and previously approved Bitcoin futures ETFs.

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