Approval Of The Spot Ethereum ETF In May Seems Extremely Unlikely

Key Points:

• SEC subpoenas and a lack of engagement cast shadows on spot Ethereum ETF approval, says Galaxy Digital’s Alex Thorn.
• The agency investigates Ether’s security status and ties between crypto firms and the Ethereum Foundation, raising concerns among investors.

The approval of spot Ethereum exchange-traded funds (ETFs) in May faces significant doubts, according to Alex Thorn, head of firmwide research at Galaxy Digital.

Spot Ethereum ETF Approval in Doubt: SEC Scrutiny Intensifies

According to The Block, Thorn stated in a note on Friday that recent developments, including SEC subpoenas and a lack of engagement, contribute to this skepticism.

Reports reveal that the Securities and Exchange Commission (SEC) is issuing subpoenas to crypto firms regarding their ties to the Ethereum Foundation. Thorn highlights that the SEC’s apparent disinterest in engaging with spot Ethereum ETF applicants further fuels doubts about approval in May.

Fortune’s report underlines the SEC’s active legal efforts to classify Ether (ETH) as a security, with U.S. companies receiving subpoenas as part of an investigation. Additionally, a confidential inquiry from a state authority to the Ethereum Foundation prompted the removal of its “warrant canary” from the website.

Thorn, a former Fidelity Investments veteran, speculates on the SEC’s interest in investigating Ethereum’s initial coin offering (ICO) in 2014 for potential unregistered securities offerings. However, any enforcement action against the Ethereum Foundation after almost a decade would be highly irregular, he suggests.

Potential SEC Actions Threaten Ethereum Industry

While SEC Chairman Gary Gensler has not commented on ETH’s security status, the SEC views Ethereum’s 2022 “Merge” upgrade as potentially strengthening the argument for ETH as a security due to the network’s transition to proof-of-stake. Nonetheless, the SEC permitted futures-based Ethereum ETFs in 2023, a year after Ethereum’s transition to PoS.

With the final deadline for one of the spot Ethereum ETF applicants set for May 23, the SEC must make a decision. Seven issuers, including BlackRock, Fidelity, Invesco with Galaxy, Grayscale, VanEck, 21Shares with Ark, and Hashdex, are currently vying to launch an ether fund.