Reuters: Spot Ethereum ETF Likely to Face Denial Next Month

After Spot Bitcoin ETFs had been approved by the US Securities and Exchange Commission (SEC) in January – and created enormous investor interest and cash inflows – hopes had been high for Spot Ethereum ETFs to follow suit.

However, as Reuters reports four people close to the matter said they believed the SEC is going to deny the applications based on ‘discouraging meetings’ in the past weeks.

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And, Bloomberg analysts had downgraded possibilities for an approval of these ETFs amid a lack of communication by the watchdog. They said regulatory silence is a negative sign, even as the SEC asked for public comments. This was brushed off by Bloomberg analyst James Seyffart as ‘standard procedure’.

Apparently there's a lot of people that need to hear this:

Asking for public comments on a 19b-4 is standard procedure. Every single 19b-4 ETF filing goes through the same process (whether approved or denied) It's not "bullish" in any capacity for #Ethereum ETFs

That is all. pic.twitter.com/fbKMIQbSbC

— James Seyffart (@JSeyff) April 3, 2024

Jan Van Eck, CEO of asset manager VanEck, agreed with that sentiment, telling CNBC during the Paris Blockchain Week that he believed the ETF applications would be denied. He said the usual process was comments on an application by regulators which happened with the Bitcoin ETFs, but not with the Ether ETFs:

Sources Say No Substantive Details Discussed

The SEC has had limited meetings about Ether ETF products, notably with Coinbase concerning Grayscale’s application to convert its Ethereum Trust into an ETF.

While the SEC previously approved Bitcoin spot ETFs based on existing surveillance mechanisms from Bitcoin futures, similar arguments were presented for Ether products.

However, the lack of specific feedback from the SEC during these discussions suggests a possible rejection of the Ether ETF applications, likely due to concerns about the underlying market’s data and nature.

Court May Have Last Say

VettaFi head of ETF analysis, Todd Rosenbluth, believes it is likely that applications will be delayed ‘until later in 2024, or longer’.

Hong Fang, president of crypto exchange OKX, said the price of ETH was suffering due to now likely denial of these ETF applications, which investors had already priced in:

In reference to Future Ethereum ETFs, Matt Hougan, Bitwise Asset Management chief investment officer said the agency might argue a lack of data and time to observe these funds:

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One of the sources told Reuters they didn’t expect an approval until an applicant takes the SEC to court – much like what happened with Bitcoin, after a decade-long fight.