Analysts and investors hold mixed sentiments as the potential approval of Ether exchange-traded funds (ETFs) in May approaches. Bloomberg analysts suggest that the likelihood of spot Ether ETF approval in May has decreased due to regulatory concerns.
While anticipation is high as the Securities and Exchange Commission (SEC) prepares to make a decision, there is still uncertainty surrounding regulatory clarity and market reactions.
According to a Bloomberg ETF analyst, the chances of spot Ether ETFs being approved in May have diminished. The analyst points out that there has been a lack of involvement from U.S. regulators with potential issuers of these products.
James Seyffart, an analyst for Bloomberg Intelligence ETF funds, stated on Tuesday, “We now believe that these ETFs will ultimately be denied on May 23 for this round.” In May, Seyffart and his colleague Eric Balchunas had previously estimated the approval likelihood at 35%.
The SEC, which had previously postponed a decision on an exchange-traded fund for spot Ether, is now obligated to make a decision by May 23. This date represents the final deadline for one of the applicants.
Currently, seven issuers, including BlackRock, Fidelity, Invesco with Galaxy, Grayscale, VanEck, 21Shares with Ark, and Hashdex, have expressed interest in launching an Ether fund.
Seyffart noted that unlike the exhaustive deliberations that took place before the approval of spot Bitcoin ETFs in January, the SEC and issuers of spot Ether ETFs have not engaged in lengthy discussions.
Chairman Gary Gensler stated in a January statement that the SEC’s approval of spot Bitcoin ETF products was in line with holding a single non-security commodity, Bitcoin.
Gensler further explained that the approval was the most sustainable course of action, partly due to the SEC’s court loss to Grayscale Investments in August.
During a panel discussion in London, Grayscale CEO Michael Sonnenshein mentioned that the litigation centered around the connection between the spot market and the regulated Bitcoin futures market.
The argument was that since the SEC had approved Bitcoin futures ETFs, it would be unfair to deny spot BTC products. Following Grayscale’s legal victory, ten spot Bitcoin ETFs have been traded on US markets in the past ten weeks.
In October, the US securities regulator authorized trading in Ether futures ETFs. This fact is cited by industry observers who believe that spot Ether ETFs are inevitable. Similar to Bitcoin futures ETFs, these funds contain futures contracts traded on the Commodity Futures Trading Commission-regulated Chicago Mercantile Exchange (CME).
Prior to a crypto report revealing that the SEC had issued subpoenas to multiple US companies regarding their transactions with the Ethereum Foundation, industry executives shared their views. The Ethereum Foundation is responsible for overseeing the Ethereum blockchain.
However, this potential investigation has revived the longstanding question of whether Ether is considered a commodity or a security. Observers suggest that this inquiry will influence the SEC’s approach to regulating Ether ETFs.
Paul Grewal, chief legal officer of Coinbase, expressed his opinion in a series of posts, stating that the SEC has no valid reason to deny the spot Ether ETF applications. He added, “And we hope they won’t try to invent one by questioning the long-established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better.”