US SEC Set to Reject Spot Ether ETFs: Crypto Investors Beware!

Key Points:

• Deadline for VanEck & ARK’s ETF applications: May 23 & 24.
• Recent meetings with SEC have left issuers discouraged.
• Rejection could delay mainstream adoption of cryptocurrencies.

U.S. issuers and other firms are bracing for disappointment as they anticipate the Securities and Exchange Commission (SEC) to rebuff their bids to introduce spot Ether ETFs linked to the price of ether.

VanEck, ARK Investment Management, and seven other entities have submitted applications to the SEC to launch ETFs tracking the spot price of ether, the world’s second-largest cryptocurrency. VanEck’s and ARK’s filings are up for review first, with deadlines set for May 23 and May 24, respectively.

Participants in recent meetings between issuers and the SEC reported one-sided discussions, lacking substantive dialogue about the proposed products. This stands in stark contrast to the thorough exchanges preceding the SEC’s approval of spot bitcoin ETFs earlier this year, noted insiders who wished to remain anonymous.

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SEC Anticipated to Reject Spot Ether ETFs

Led by crypto skeptic Gary Gensler, the SEC’s rejection of spot bitcoin ETFs persisted for over a decade due to concerns over market manipulation. However, after Grayscale Investments successfully challenged the decision in court, the SEC was compelled to approve them.

Issuers have argued that the precedent set by approved bitcoin ETFs and ether futures-based ETFs, sanctioned in October, should extend to spot ether products. Despite efforts to address regulatory concerns, SEC staff remained reticent during meetings, signaling potential denials.

A rejection would be a setback for the crypto industry, which had hoped for a ripple effect from spot bitcoin ETFs, ushering in similar products and mainstream adoption of cryptocurrencies.

VanEck & ARK’s ETF Applications: Critical May Deadlines

While some issuers plan to continue engagement with additional disclosure filings, expectations of rejection have already impacted ether’s price, according to industry experts. The SEC’s sparse engagement on ether products contrasts with its more extensive discussions on bitcoin ETFs, leaving applicants uncertain about the regulatory landscape.

The only disclosed meeting related to ether products involved crypto exchange Coinbase, underscoring the SEC’s limited visibility into the market. If the SEC does reject ether ETFs, it may cite concerns about data depth and market surveillance, potentially leading to prolonged delays or legal challenges.