Is Ethereum spot ETF on the horizon?

According to media reports, four people familiar with the matter revealed that US issuers and other companies expect that the U.S. Securities and Exchange Commission (SEC) will reject their applications to launch Ethereum spot ETFs.

Previously, VanEck, ARK Investment Management and seven other issuers submitted listing applications for ETFs linked to the price of Ethereum to the SEC. The SEC must respond to the documents of VanEck and ARK on May 23 and May 24, respectively.

People familiar with the matter revealed that recent meetings between the SEC and issuers were not optimistic because agency staff did not discuss execution details about the financial product, in stark contrast to previous intensive and detailed discussions on Bitcoin spot ETFs.

Last October, the SEC approved the launch of several Ethereum "futures" ETFs. People familiar with the matter said that the issuers believed that this decision had paved the way for Ethereum "spot" ETFs at the meeting and expressed their determination to resolve potential regulatory issues to the SEC.

But after listening to the issuers, the SEC did not elaborate on specific concerns or ask general questions, suggesting that the agency will reject the applications. More broadly, the U.S. regulator does not seem to want to replicate the example of a bitcoin spot ETF for other products.

Earlier this month, VanEck CEO Jan van Eck told the media that its application "will most likely be rejected." But some issuers said they still plan to submit more disclosure documents to the SEC to keep the dialogue going.

In fact, the current SEC Chairman Gary Gensler has always been a skeptic of cryptocurrency, and the Bitcoin spot ETF was only approved after Grayscale Investments won the lawsuit against the SEC.

Critics say that if an Ethereum spot ETF is approved, it could pave the way for the launch of more speculative cryptocurrency ETFs, which would expose investors to greater risks than they expect.

Todd Rosenbluth, head of ETF analytics at data firm VettaFi, commented, “The regulatory outlook remains cloudy, and at this point it seems more likely that the SEC will delay approval until later in 2024, or even longer.”

Analyst Eric Balchunas believes that the probability of an Ethereum spot ETF being approved by the end of May this year is only 25%, compared to his previous forecast of 70%. The report from prediction market Polymarket is even more pessimistic, giving the probability as only 11%.

According to Bitstamp quotes, Ethereum fell 3% in the past 24 hours and Bitcoin fell nearly 2.8%.