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The conversation around the potential approval of spot Ethereum ETFs (exchange-traded funds) is heating up, thanks to the SEC’s recent request that exchanges update 19B-4 filings for the ETFs on an accelerated basis. Bloomberg analyst Eric Balchunas, alongside colleague James Seyffart, recently adjusted their forecasted approval odds from a mere 25% to an optimistic 75%.
Update: @JSeyff and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they'd be denied). See… https://t.co/gcxgYHz3om
— Eric Balchunas (@EricBalchunas) May 20, 2024
This adjustment reflects what the community perceives to be a potential change in the Securities and Exchange Commission’s (SEC) approach to cryptocurrency regulation, caused by political influences and recent developments within the agency.
SEC Faces Important Decision Deadline
This week, the SEC must decide on both the 19b-4 filings and the S-1 registration statements. The 19b-4 filings pertain to changes in exchange rules necessary for listing new products like Ethereum ETFs. The S-1 registration statements provide detailed information about the ETF’s structure, management, and its strategy to replicate Ethereum’s performance. While it’s technically possible for the SEC to approve the 19b-4s, they might delay the S-1s.
The SEC’s review process involves several steps. First, the SEC evaluates the 19b-4 filings from exchanges like NYSE or Nasdaq, which seek permission to list the new Ethereum ETFs. Approval of these filings is very important as it allows the ETFs to be added to trading platforms.
S-1 is Critical for Approval
The actual sale of these ETFs to the public depends on the approval of the S-1 registration statements. These documents are essential as they provide potential investors and the SEC itself with comprehensive details about the financial and operational aspects of these crypto products.
Despite the possibility of approving the 19b-4s, the SEC might slow the approval process for the S-1s. This delay tactic, possibly due to the risks associated with cryptocurrency products, allows the SEC more time to assess market conditions and the specific structures of these ETFs.
Such delays would be normal on the agency’s part, seeing as it continues sharing its concerns about the stability and security of any type of investment in cryptocurrencies. The approval could very well nudge us into the highly-anticipated 2024 bull run. Conversely, any postponement or rejection could influence market perceptions and investor confidence, thereby making way for the bears to get back on top, albeit maybe temporarily.
The SEC Has Been Dragging Its Feet
In the recent months leading up to May, the SEC has taken a cautious approach, postponing decisions and extending review periods for several Ether ETF applications. Notably, the review of Franklin Templeton’s application has been delayed until June 11, while decisions on applications from Invesco and Galaxy were also deferred.
Earlier, the SEC extended the review period for an application from BlackRock, indicating a pattern of thorough scrutiny. The upcoming deadlines for proposals from VanEck and Grayscale later this month are particularly important, with the investment community closely keeping an eye out.
Meanwhile, Grayscale Investments has decided to withdraw its application for an Ethereum-based spot ETF. Michael Sonnenshein, the former CEO of Grayscale, announced the company will instead focus on converting its Ethereum trust into spot exchange-traded products.
Cryptopolitan reporting by Jai Hamid