Reversal Alert: SEC Rumoured to Shift on Spot Ethereum ETF Applications

By Aaron Feuerstein May 21, 2024 In Bitcoin, ETF, Ethereum, SEC
  • False SEC approval news once caused market turmoil; Ethereum ETF rumours now raise similar concerns.
  • SEC hastens document updates for Ether ETF, hinting at possible approval despite no guarantees.
  • Past confusions over security status linger with approval of key filings pending.

Could this be another moment like we saw in the process of the Spot Bitcoin exchange-traded funds (ETF) approvals? At the time the market rallied on what soon would turn out to be fake news.

The X account (formerly Twitter) of the US Securities and Exchange Commission (SEC) had falsely declared the ETFs had been approved.

Related: Amid Strong Weekend Performance Small Traders are Liquidating Positions, Santiment Says

This false post triggered a market crash and resulted in millions being liquidated from both short and long positions. The SEC granted the actual approval shortly after.


So, now, in the Ethereum ETF approval saga, news has broken that the Spot Ether ETFs might be approved soon. This comes as Bloomberg analysts change their likelihood rating of an approval from 25% to 75%.

Naturally, it’s on investors’ minds: is this fake news?

Bloomberg’s James Seyffart came out quickly to deny that he or anyone else involved in the breaking news had been hacked:

SEC to Speed Up Process, Asks for More Documents

So, what is this based on?

The companies wanting to list and trade the funds are being asked to update crucial documents. According to the Wall Street Journal, citing people familiar with the matter, the SEC’s Trading and Markets Division told applicants on Monday to refile forms, known as 19b-4 filings.

CoinDesk also reported that “three people familiar with the situation” said the SEC told these companies to update the filings on an “accelerated basis”.

While this is good news, it doesn’t guarantee an outright approval of Spot Ether ETFs, because the applicants still need their S-1 filings approved.

The sources suggested the 19b-4 filings could be approved ahead of a deadline on Thursday.

The SEC must approve both 19b-4s and S-1s for the ETF to be legally sold to the public. The SEC has a statutory timeframe to make an initial decision on the 19b-4 filings, and if approved, it allows the ETFs to be listed on exchanges, but without S-1 approval, they cannot be sold to investors.

Approval Likely, But Not Guaranteed

Even if 19b-4s are approved, the SEC could delay approving S-1s, potentially due to the complexities and risks associated with crypto products.

Related: Coinbase Reveals Optimistic View on Ethereum ETF Approval, Expert Weighs in

The past weeks and months have been full of speculation about whether the SEC would classify ETH a security or not. BlackRock’s Larry Fink commented on the issue, saying it wouldn’t even matter as ETFs regularly trade securities.

However, the question is then, what happens if ETH is deemed an unregistered security? An unregistered security has not gone through the SEC’s registration process, which is required for most securities before they can be sold to the public.

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Aaron Feuerstein

Aaron Feuerstein

Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.

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