Ethereum
Fund Managers Predict SEC Rejection of Ethereum ETFs Next Week
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In contrast to the enthusiasm that preceded the approval of spot Bitcoin ETFs, reports in recent weeks suggest that optimistic expectations for approval of the Ethereum product have cooled. Speaking to Bloomberg this week, Katherine Dowling, general counsel for ETF applicant Bitwise, said she anticipates a rejection next week due to the lack of public activity typically seen before approval.
“Most people universally expect an order of disapproval,” Dowling said. note. “You don’t see the types of public activities that you would see if there was an endorsement. »
In an interview with CNBC, Jan van Eck, CEO of VanEck, also predicted a likely refusal. Next week, the SEC’s decision will confirm the fate of the VanEck and Ark Invest files.
“We were also the first to file for Ethereum in the United States, and we and Cathy Wood are kind of the first in line for May, I guess, to probably get rejected,” he said . declared.
Unlike the frequent reviews made to spot Bitcoin ETF applications, there has been little interaction between fund companies and the SEC regarding Ether ETFs. People involved in negotiations with the securities agency said they had prepared for a negative result.
Over the past month leading up to the Bitcoin ETF spot decision, the market has been in turmoil. Fund managers have engaged in fierce competition over fees, while industry experts have placed bullish bets.
Bloomberg ETF analysts James Seyffart and Eric Balchunas pegged the odds of approval for Ethereum spot ETFs at just 25%. Seyffart recently expressed skepticism about a positive outcome, saying a nod “wouldn’t happen.”
Why might the SEC decide to reject Ethereum spot ETFs?
SEC Chairman Gary Gensler has not spoken about the Ethereum ETF filings. However, he has clarified that the approval of spot Bitcoin ETFs does not set a precedent for other crypto ETFs. Concerns over the classification of most cryptocurrencies as securities remain a major obstacle to compliance.
According to Scott Johnsson, general partner at Van Buren Capital, the SEC must provide a clear and detailed explanation if it rejects Ethereum ETF spot deposits. A potential reason for rejection could be Ethereum’s classification.
The obvious goal is to potentially deny the application on the grounds that these one-time deposits are improperly filed as commodity-based trust shares and are not eligible if they hold a security.
–Scott Johnsson (@SGJohnsson) May 14, 2024
The SEC has not definitively classified Ether, and its decision may depend on whether it considers Ether a security. If the SEC considers Ether to be a security, spot ETFs would not be permitted under current regulations.
The SEC Allegations investigations into the Ethereum Foundation and the implications of Ethereum’s staking functionality suggest possible regulatory direction.
SEC May Not Approve All Ethereum ETF Spot Applications at Once: Coinbase
Despite the uncertainty, Coinbase analyst David Han believes there is a 30-40% chance of approval by the end of the month.
He believes that the correlation between CME futures and spot exchange rates, which played a crucial role in the approval of Bitcoin ETFs, could also benefit Ethereum ETFs.
However, like Johnson, Han note that the SEC may focus on Ethereum’s PoS mechanism as a reason for denial, as regulations regarding staking are unclear. He suggested that Ethereum spot ETFs allowing staking are unlikely to be approved.
ARK Invest and 21Shares recently amended their Form S-1 for the Ethereum spot exchange-traded fund (ETF) offered in remove staking component. The move is seen as an effort to align the filing with the SEC’s preferences.
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