‘Hard no’ or ‘Soon’ – What the industry thinks of a spot Ethereum ETF

• Opinions clash on the possible approval of a spot Ethereum ETF
• Final decisions are expected between May and August

Excitement is mounting over the U.S. Securities and Exchange Commission’s (SEC) impending decision on several applications for Ethereum spot exchange-traded funds (ETFs). The same was highlighted by Fox Business’s Eleanor Terrett in her latest post on X (Formerly known as Twitter).

While some issuers are buoyant, correlating potential approval with the SEC’s recent green light for Bitcoin spot ETFs, others harbour serious reservations. 

Reporting on the timeline for a potential $ETH ETF approval has turned up a plethora of different takes from ETF issuers, investment management firms and sources close to the @SECGov.

✨One $BTC Spot ETF issuer with an ETH Spot ETF application says they’re confident the…

— Eleanor Terrett (@EleanorTerrett) January 23, 2024

Internal resistance and diverse perspectives

According to Terrett, there is notable internal resistance within the SEC against the approval of an Ethereum (ETH) spot ETF. One of her sources describes this sentiment as a “hard no,” indicating significant pushback within the regulatory body.

On the flip side, several asset managers and ETF issuers remain hopeful. In doing so, they have drawn parallels to the SEC’s earlier nod for Ethereum Futures ETFs. Additionally, they pointed to BlackRock’s strong track record with ETF approvals. 

Industry leaders weigh in

JPMorgan Chase & Co. (JPM) has expressed a cautious position, estimating the likelihood of the SEC approving the ETF by May at no more than 50%. This cautious outlook is echoed by Mark Yusko, CEO of Morgan Creek Capital, who also sees less than a 50% chance of approval. Yusko emphasized the SEC’s general resistance to the cryptocurrency sector, suggesting a broader context of regulatory skepticism. 

On the contrary, Eric Balchunas, a senior ETF analyst at Bloomberg, offered a more optimistic view. He estimated a 70% probability of approval for a spot Ether ETF by May. 

Additionally, digital asset lawyer Joe Carlasare, in a recent tweet, presented a compelling argument for the likely approval of an Ethereum ETF. Carlasare noted that the SEC has previously approved ETFs based on ETH Futures, which are currently traded on the Chicago Mercantile Exchange (CME).

In my opinion, the analysis of the SEC in its approval of the spot Bitcoin ETFs all but guarantees an approval of a ETH spot ETF for the following reasons:

1. ETH Futures are already trading on the CME.
2. The SEC has already approved ETH futures ETFs.
3. The CME has identical… pic.twitter.com/bCSUymdc6e

— Joe Carlasare (@JoeCarlasare) January 15, 2024

Finally, in a recent discussion, Tom Staudt, the President and Chief Operating Officer (COO) of ARK Invest, expressed optimism about its arrival. When asked about the timeline for the introduction of a spot ETH ETF, Staudt confidently responded with “soon.” 

SEC’s position on Ethereum ETF

Adding complexity to the debate, SEC Chair Gary Gensler released a letter on the 10th of January. The letter stated,

However, SEC Commissioner Hester Peirce seemed to offer a different perspective. Known for her pro-crypto stance, Peirce believes that the approval of spot Ether ETFs will not necessitate a legal battle.

The countdown continues

Now, the fate of Ethereum spot ETFs rests in the hands of the SEC. In the coming months, the SEC is scheduled to make a determination on several applications. These include decisions on VanEck’s application by 23 May, ARK 21Shares by 24 May, Hashdex by 30 May, Grayscale by 18 June, and Invesco by 5 July. 

Decisions regarding the applications submitted by Fidelity and BlackRock are expected by 3 and 7 August, respectively.