According to U.Today, James Seyffart, a leading ETF analyst, has suggested that the US Securities and Exchange Commission (SEC) may deny numerous Ethereum ETF applications in May. The SEC may argue that the underlying cryptocurrency, Ethereum, is a security. Seyffart stated that while it's not guaranteed, it's almost certain that the SEC is considering this move.
This speculation follows comments from finance lawyer Scott Johnsson, who suggested that the legal status of Ethereum could be a factor in the SEC's upcoming ETF order. Johnsson stated that the SEC is expected to provide a 'notice of the grounds for disapproval under consideration'. The SEC has previously argued that offering commodity-based trust shares is improper when the underlying asset is a security. This is a problem that Bitcoin ETFs did not have to contend with.
The SEC is due to make its final decision on the Ethereum ETF filings from VanEck and ARK on May 23 and May 24 respectively. The general industry consensus is that these applications will likely be rejected by the SEC due to a lack of engagement with issuers. However, the exact reason for this potential rejection remains unclear. Matt Hougan from Bitwise suggests that the Ethereum ETF products may be rejected due to insufficient data.
In addition to VanEck and Ark Invest, several other major players, including BlackRock and Fidelity, are also looking to launch a spot Ethereum ETF. Grayscale, which won a significant legal victory against the SEC last year, recently withdrew its Ethereum futures filing, indicating that it does not plan to pursue another lawsuit against the agency. The SEC has previously faced a lawsuit from Ethereum backer ConsenSys over attempts to label the leading altcoin as a security. Despite this, BlackRock’s Larry Fink recently stated that such a designation would not necessarily prevent them from launching an Ether ETF.