While bitcoin spot exchange traded funds (ETFs) have been given the green light, an Ethereum spot ETF may be given a red light. According to a Reuters report published today, sources familiar with recent talks between ETF issuers and the SEC suggest that the SEC is likely to reject Ethereum spot ETFs in its final review next month.
The SEC's decision on the VanEck and ARK applications will be made on May 23 and May 24, respectively, and according to four people who reportedly participated in meetings with the SEC, SEC staff did not discuss the #BTC #ETF offering in detail.
The sources also noted that despite claims by ETF issuers that an approved spot #bitcoin ETF and an ETF based on Ethereum futures would set a precedent, the SEC's silence on specifics suggests they are likely to be rejected.
According to SEC documents and sources familiar with the matter, the SEC has not held many meetings to review Ethereum-based spot ETFs. Of the few meetings that have taken place, only one was publicized. That was a meeting with Coinbase regarding Grayscale's proposal to turn its Ethereum Trust into an ETF, with Coinbase acting as the custodian for that ETF.
If the SEC rejects the Ethereum ETF, the petitioners say the reasons will be broader, including concerns about the quality and depth of Ethereum's market data.
Matt Hogan, chief investment officer at Bitwise Asset Management, one of the applicants for the Ethereum spot ETF, suggests that the SEC may want more time to study the Ethereum futures market before making a decision.
The SEC's approach to the Ethereum spot ETF application is different from the past, when there was an intense and detailed dialog before the SEC approved a bitcoin spot ETF in January.
Previously, the SEC rejected bitcoin spot ETFs due to concerns about market manipulation. However, after a legal battle with Grayscale Investments, it was forced to approve it.
JP Morgan analysts have suggested in previous comments that if the SEC rejects the Ethereum spot application, ETF issuers could file a lawsuit against the SEC, which would eventually force the SEC to reconsider and approve trading in these instruments.
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