The Securities and Exchange Commission’s lack of communication regarding Ether (ETH) exchange-traded funds (ETFs) may not bode well for those anticipating approvals for Ether ETFs by May.
Bloomberg ETF analyst Eric Balchunas believes the chances of Ether ETF approval have decreased to just 35%, citing several reasons for his downgrade.
One major concern is the lack of contact or comments from the SEC to ETF issuers with only 73 days remaining until the final deadline. Balchunas considers this a troubling sign.
He explains that the SEC must provide feedback and the issuers must make necessary corrections, which can be a lengthy process that may even require refiling and multiple meetings.
Furthermore, Balchunas has received reliable information suggesting that the SEC may intentionally be avoiding communication with potential fund issuers.
Balchunas also points to SEC Chair Gary Gensler’s stance on Ether as a possible factor. According to Balchunas, Gensler still views Ether as a security and may be hesitant to face another round of backlash similar to the approval of spot Bitcoin ETFs and the SEC’s court loss to Grayscale in August 2023.
He also speculates that Gensler may feel that he has already made concessions to the industry and may not be willing to make any further compromises.
The Shift to Web 3.0: A Closer Look at the Ethereum ETF Process
There’s a sense of unease surrounding the ETF process for Ether. According to Balchunas, it’s a complete reversal of the experience during the Bitcoin ETF race. While he acknowledges that this is his personal opinion, he also believes it’s an important factor in the decision-making process.
In a post on X, Nate Geraci, president of ETF Store, points out the strange situation where the SEC approved ETH futures ETFs in October but denied spot products in May, without much explanation.
Meanwhile, Matt Corva, general counsel at Consensys, suggests that an ETH ETF denial could actually be a positive development in the long-term. He believes that if the SEC denies ETH, they will face backlash from their political handlers and lose their ability to discriminate against other coins.
On March 6, representatives from Coinbase and Grayscale met with the SEC to discuss a rule change for launching spot Ether exchange-traded funds. While many saw this as a positive sign for an Ethereum ETF approval, Balchunas looks to a “strong” thesis from Scott Johnsson, general partner at VB Capital, as a potential reason for denial. Johnsson notes that the meeting was not with prospective fund issuers and was primarily focused on analyzing the correlation between ETH and BTC futures compared to spot.
This correlation analysis could be a deciding factor in the approval or denial of the ETF. Balchunas agrees with Johnsson that denial is more likely. He also suggests that if the SEC were to reject all pending Ethereum ETF applications, the next important date to watch would be the U.S. Presidential election on November 5.
Balchunas explains that even if Biden wins, there could be changes in the people in charge, potentially leading to a change in the decision. If Trump wins, there could also be significant changes. This is why Balchunas believes the election day is crucial to watch.
Ultimately, Balchunas is confident that a spot Ether ETF will be approved at some point, it’s just a matter of when.
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