Ethereum (ETH) has spiked strongly over the past twenty-four hours, following a sudden shift in expectations regarding the prospects for a slate of spot-backed ETH funds that could green light from the SEC this week. The commission’s request that exchanges make adjustments to their 19b-4 applications on an accelerated basis was followed up by new amendments to multiple S-1 filings from asset managers hoping to launch spot ETH funds, suggesting the commission is engaging in constructive and positive dialogue with both parties. The SEC is facing a final decision date for just two of the eleven outstanding ETF applications this week but a potential approval would likely extend to all of the applicants simultaneously.
Many were shocked by the commission’s sudden action on these spot ETH fund applications, but MRP has maintained for months now that an approval is likely at some time between May and August due to previous litigation, a potential conflict with fellow regulators at the CFTC, and the previous statements of high ranking SEC officials. There is speculation about a “sell the news” event following any potential approval, but the resoundingly successful rollout of spot-backed BTC products earlier this year may throw cold water on some of those concerns.
Related ETF & Assets: ProShares Ether Strategy ETF (EETH), Ethereum (ETH-USD)
The final deadline for the SEC to issue a decision regarding the approval or rejection of VanEck and ARK Investment’s respective applications to launch spot-backed Ethereum (ETH) funds in the US is this Thursday. A previously negative outlook by many speculators was brightened significantly yesterday after Nasdaq, CBOE and NYSE to fine-tune their 19b-4 filings to list spot ETH funds, signaling the agency may be poised to approve the filings. There had been little communication between the SEC, asset managers, and the exchanges they’d list their new funds on leading up to this week. The anticipated approval of 19b-4 filings are only half of the battle, but both Fidelity and Grayscale Investments delivered amended versions of their S-1 filings to the SEC for their spot ETH funds as well, suggesting there has been constructive dialogue between the commission and asset managers as well. Bloomberg Intelligence analysts have increased their estimated probability that a spot ETH ETF receives approval from the SEC to 75% from 25%, a massive and sudden shift in sentiment. This was not such a surprise for MRP, as we suggested an SEC approval to list spot ETH funds in 2024 was likely to follow the listing of similar BTC-backed products back in January. There are a total of twelve asset managers with pending applications to introduce similar products as well. A potential approval later this week would likely apply to all of the funds simultaneously.
Our expectation for an approval this year was based on several factors that made a rejection by the SEC an unlikely scenario. First and foremost, the commission would be running up against precedent already set by the DC Court of Appeals when it came out on the losing end of a contentious legal challenge from Grayscale Investments in 2023, wherein three federal judges presiding over the case unanimously sided with the asset manager. This decision was based on the fact that that the SEC’s oft-cited rationale for rejecting a request to convert the Grayscale Bitcoin Trust (GBTC) product into an ETF was “arbitrary and capricious”, and exhibited “unlike regulatory treatment of like products”, in reference to futures-backed Bitcoin ETFs like the ProShares Bitcoin Strategy ETF (BITO) that had previously been approved by the SEC. Therefore, it would seem that an SEC rejection of spot-backed ETH ETF launches would once again be treating similar products (futures ETFs and spot ETFs) differently as there are already multiple futures-based ETH funds that have been previously approved by the SEC. Though some suggest that commission Chair Gary Gensler is willing to push forward with a rejection of ETH-backed funds and…
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