Ethereum ETF chances ‘slim to none’ as SEC considers ETH ‘security’

  • SEC could reject spot ETH ETF application based on ‘security’ status.
  • Mixed feelings on possible SEC’s rejection grounds as ETH price dropped. 

The US SEC (Securities and Exchange Commission) has been quiet on the status of Ethereum [ETH] and whether it will approve the spot ETH ETF filings. 

However, a recent development indicates that the agency could reject the ETF applications and raise ETH’s security status issue. 

Reacting to a recent SEC’s notice on spot ETF filings, Bloomberg ETF analyst James Seyffart doubled his odds of the agency’s rejection of the applications. Seyffart commented

“Looks like odds just went up for SEC to deny Ethereum ETFs by claiming #Ethereum is a security. Not a guarantee that they will do this, but I think this almost guarantees that the SEC is at least considering it.” 

Mixed feelings about possible Ethereum ETF rejection

The overall market has been expecting a rejection of ETH ETF applications in May. The above development could shed some light on the possible grounds for the agency’s move. 

However, Nate Geraci of ETF Store wasn’t convinced the agency had a sound ground for rejecting the spot ETF applications.

Citing the recent removal of staking features and existing ETH futures amongst others, Geraci wondered

“If SEC denies spot eth ETFs, what will rationale be…Lack of correlation b/w spot & futures market? Then why approve eth futures ETFs. ETH = security? Then why approve eth futures ETFs. Staking? Issuers have (reluctantly) removed. I don’t see path for legal disapproval here.”

Last week, ARK and 21 Shares removed staking features on their spot ETH ETF application. Some market watchers read the update as a possible approval by the SEC. 

The sentiment was quickly reflected by the uptick in the chance of May ETH ETF approval on the prediction market, Polymarket.

Approval chances jumped from 9% on the 10th of May (ARK’s update) to 16% on the 13th of May. 

However, the revelation of SEC’s possible ETF rejection and raising of ETH’s ‘security’ status saw the approval chance drop to 13% on Polymarket at the time of writing. 

Seyffart’s colleague, Eric Balchunas, also echoed his sentiment. Reacting to SEC’s spot ETF notice, Balchunas said

“TLDR: the SEC asked commenters re the Eth spot ETFs whether these filers have properly filed their ETF listing proposals as commodities. This shows the SEC is perhaps considering to ETH is a security in their denial. Our odds of approval remain the same: slim to none.”

Ark Invest and 21 Shares ETH ETF applications are due for the SEC’s decision next week, the 24th of May. The decision on the Hashdex application will be on the 30th of May. 

However, pessimistic views on the SEC’s spot ETF approval have dragged ETH’s price down.

The king of altcoins has been in a price downtrend since mid-March – a bearish market structure that could push ETH to $2500 or lower. 

Next: Bitcoin to stay within $55k-$75K – But for how long?

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