SEC Likely to Reject Ethereum ETF, A Blow to Bulls

Ethereum (ETH) enthusiasts may face disappointment as reports suggest that the U.S. Securities and Exchange Commission (SEC) is likely to halt the launch of a spot Ethereum exchange-traded fund (ETF) as early as next month.

Interaction with the SEC Halted

According to a Reuters report on April 25, sources familiar with recent meetings between potential ETF issuers and the SEC indicated that the agency is likely to reject the Ethereum ETF spot issuance during its final review in May.

Unlike the intense discussions prior to the SEC’s approval of a spot Bitcoin ETF in January, recent negotiations have been one-sided. Four industry representatives who attended the meetings reported that SEC staff did not engage in substantive details regarding the Ethereum ETF applications.

The sources also mentioned that despite ETF applicants arguing that the approved spot BTC ETFs and ETFs based on Ethereum futures set a precedent, the SEC’s lack of detailed discussions with issuers suggests an impending denial by the commission.

VanEck, ARK Investment Management, BlackRock, Fidelity, and many other issuers have submitted documents to the SEC to launch ETFs tracking the price of ETH. The regulatory deadlines for decisions on applications from VanEck and ARK are May 23 and May 24, respectively.

Analysts from JPMorgan have previously stated that if the SEC rejects the spot ETH proposals, ETF issuers could sue the regulatory body, potentially leading to the products being approved through court intervention.

Before this landmark approval, the SEC had been obstructing spot BTC ETF applications for over a decade. It wasn’t until August 2023 that Grayscale Investments achieved a significant victory in a legal battle against the regulator, prompting a change in stance.

Ethereum Faces Setback

The possibility of the SEC rejecting the ETF has cast a shadow over the Ethereum market, as bulls had hoped the approval of spot BTC ETFs would herald wider acceptance of cryptocurrency investment products.

Moreover, there have been reports that the SEC is seriously considering designating Ethereum as a security. As previously reported by ZyCrypto, the Ethereum Foundation revealed in February that it had received inquiries from an undisclosed “national authority,” which was later revealed to be the SEC.

Impact on Ethereum’s Price

Although Ethereum’s value has grown modestly by 33% this year, it has struggled to keep up with Bitcoin’s 47% rise and recent record highs, reflecting the market’s sentiment towards its regulatory challenges.

Hong Fang, president of the cryptocurrency exchange OKX, told Reuters that the uncertainty surrounding the approval of spot ETH ETFs could bring bearish pressure on Ethereum’s price. “As people build up this expectation, the price faces greater downward pressure,” Fang asserted.

According to CoinGecko data, as of press time, the price of Ethereum hovers around $3,130, with a 1.5% increase on the day.

Sentiment: Negative