Ethereum ETF chances ‘slim to none’ as SEC considers ETH ‘security’

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    SEC could reject spot ETH ETF application based on ‘security’ status.
    Mixed feelings on possible SEC’s rejection grounds as ETH price dropped. 

As an analyst with experience in the crypto market, I have mixed feelings about the possible SEC rejection of Ethereum [ETH] spot ETF applications based on the reported grounds of ETH’s ‘security’ status. While the overall market has been expecting a rejection in May, the revelation that this could be due to security concerns adds a layer of uncertainty.

The Securities and Exchange Commission (SEC) in the United States has yet to make a statement regarding Ethereum‘s [ETH] approval for spot ETF proposals.

A new turn of events suggests that the regulatory agency may deny the Exchange-Traded Fund (ETF) applications for Ethereum, citing concerns over its security status.

As a researcher closely following developments in the exchange-traded fund (ETF) space, I’ve recently taken note of the Securities and Exchange Commission’s (SEC) notice regarding spot ETF filings. This event has led me to reassess the likelihood of the SEC rejecting these applications, thereby increasing my estimation of this probability from 50% to 100%.

As an analyst, I’ve noticed a shift in the odds favoring the Securities and Exchange Commission (SEC) denying Ethereum Exchange-Traded Funds (ETFs). This doesn’t mean they will definitely make this decision, but their recent stance suggests that they are at least considering classifying Ethereum as a security.

Mixed feelings about possible Ethereum ETF rejection

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It was widely anticipated that regulatory authorities would dismiss Ethereum ETF proposals in May. This recent announcement may provide insight into why such decisions are being made.

Nate Geraci of ETF Store expressed doubt over the Securities and Exchange Commission’s justification for denying the listing of spot ETFs.

In light of the recent elimination of staking capabilities and Ethereum futures among other changes, Geraci pondered,

If the SEC rejects spot Ethereum ETAs, what could be their reasoning…Is it due to insufficient correlation between the spot and futures Ethereum markets? But why then approve Ethereum futures ETAs? If Ethereum is considered a security, why approve futures ETA for it? What about staking, which issuers have reluctantly removed? I find it hard to identify a valid legal reason for their disapproval.

Last week, ARK and 21 Shares took away the staking functionality from their proposed spot Ethereum exchange-traded fund (ETF). Some observers interpreted this action as a potential indication of SEC approval.

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The feeling was mirrored in the increased likelihood of May Ethereum ETF acceptance on the forecasting platform, Polymarket.

Approval chances jumped from 9% on the 10th of May (ARK’s update) to 16% on the 13th of May. 

The SEC’s potential rejection of an ETF and classification of Ethereum as a security lowered the approval probability to 13% on Polymarket according to current reports.

In response to the SEC’s announcement regarding spot ETFs, Eric Balchunas, a colleague of Seyffart’s, shared similar views.

The Securities and Exchange Commission (SEC) has requested feedback from commentators regarding Ethereum-based spot ETF filings, focusing on whether these proposals have been correctly submitted as commodity offerings. This could indicate that the SEC is contemplating classifying Ethereum as a security in their potential rejection. Our approval chances remain low: unlikely at best.

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As a crypto investor, I’m eagerly anticipating the upcoming decisions from the Securities and Exchange Commission (SEC). The applications for the Ark Invest and 21 Shares Ethereum-based exchange-traded funds (ETFs) are set to receive a response on May 24th. Similarly, the Hashdex Bitcoin ETF application is slated for a decision on May 30th. These potential approvals could mark significant milestones in the crypto space and bring more institutional investment into the market.

However, pessimistic views on the SEC’s spot ETF approval have dragged ETH’s price down.

Since the middle of March, the monarch of alternate coins has seen a descending trend in its price. This pessimistic market pattern might potentially drive Ethereum down to the price range of $2500 or even lower.

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2024-05-15 21:12