- Ethereum Spot ETF is likely to be rejected on May 23rd.
- Even if this strategy were successful in issuing a Bitcoin ETF, the would-be issuer would probably not sue the SEC.
- The US presidential election may hold the key to approval.
The Securities and Exchange Commission will likely deny the Ethereum Spot ETF application on May 23rd.
The lack of meaningful interaction with prospective issuers, combined with Ethereum’s murky regulatory status, has made analysts pessimistic about its chances.
Not to mention the recent investigation into the Ethereum Foundation by the SEC.
That means the Spot Ethereum ETF probably won’t see the light of day until the end of 2025, said Eric Balchunas, ETF analyst at Bloomberg Intelligence. DL News.
When faced with a rejection, prospective ETF issuers like BlackRock, Fidelity, and Ark Invest have two options. Either they can file a lawsuit with the SEC, as Grayscale did against the Bitcoin Spot ETF, or they can refile at a later date.
Factoring into this equation is the US election. The SEC will likely face a change in leadership if former President Donald Trump wins a second term in the White House. And the new chairman could be more crypto-friendly than Gary Gensler.
“Once we have a new president, we will apply again,” Balciunas said. “Maybe it’ll get approved. Or we’ll sue. Either way, it’s going to take another full year.”
sue the SEC
The SEC spent years revoking Bitcoin Spot ETF applications until Grayscale filed a protest and lawsuit against regulators in 2022.
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In September, a judge found that the SEC acted in an “arbitrary and capricious” manner in denying the application. Four months later, a Bitcoin ETF was launched.
Still, this strategy is unlikely to be replicated in Ethereum ETFs. First, Balciunas said Grayscale won’t reignite his SEC. DL News.
Litigation is expensive not only in terms of money, but also in terms of attention and bandwidth. And it would not be surprising if Grayscale did not actively pursue converting its Ethereum trust after suffering massive outflows when its Bitcoin trust was converted into an ETF.
Meanwhile, other prospective issuers don’t dare pick up the baton and sue regulators themselves, Balciunas said.
“No other company wants to anger the SEC,” Balciunas said. “Grayscale was unique in that it wasn’t a major ETF issuer. There’s something else going on with these remaining companies, and they’re more afraid.” “No one else is going to come forward.” he added.
election time
And why sue the SEC when the issue could be resolved with the upcoming US presidential election this November?
The odds of a new SEC chairman being appointed are higher than previously expected, with Trump leading in some polls.
“Trump is not necessarily a supporter of cryptocurrencies,” Balciunas said. “Remember, his former SEC Commissioner Jay Clayton didn’t allow that ETF either, so he won’t be like, ‘Let’s just go crazy.’ But perhaps he’s still better off with cryptocurrencies or spot ETFs. ”
Assuming a new chair is appointed in April or May and the application is submitted shortly thereafter, the deadline for approval or rejection could be around December 2025.
Alternatively, issuers could try to file as soon as the election is over, or even before the results are released, to speed up the timeline.
And if Joe Biden wins?
“In past cycles, when we rejected spot Bitcoin ETFs, there was typically a cool-off period of about a year where no one did anything,” Balciunas said. “And then all of a sudden someone says, ‘Oh, there’s nothing I can do about it,’ and they file again.”
“My guess is that issuers will just sit back and lick their wounds over the summer and then see what happens with the election,” he added.
Tom Carreras is a market correspondent. DL News. Do you have any tips for Ethereum ETFs? Contact us at tcarreras@dlnews.com.
