Ethereum ETF: SEC hits pause again, is a May launch possible?

• SEC’s latest delay announcement has spurred some degree of skepticism
• Experts are now revising the odds of an Ethereum spot ETF being approved

The United States (US) Securities and Exchange Commission (SEC) has pushed back its verdict on the proposed Ethereum [ETH] exchange-traded funds (ETFs) by Hashdex and ARK 21Shares. 

This delay, announced on the 19th of March, precedes the “third deadline” set by the agency, with final determinations anticipated in late May. The announcement underscored that ARK 21Shares’ decision is due by 24th May, with Hashdex’s deadline set for 30th May. 

However, analysts harbor growing skepticism regarding the approval likelihood of the eight Ether ETF proposals, including those from BlackRock, Grayscale, and Fidelity.

Ether ETF approval uncertainties

Bloomberg ETF analyst James Seyffart voiced apprehensions regarding the minimal interaction between the SEC and the applicants, raising uncertainties about the future of these ETFs.

He noted, 

“My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round. 

He further added,

“The SEC hasn’t engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin  ETFs this fall.”

In recent developments, Eric Balchunas, an analyst at Bloomberg ETF, revised the chances of Ether ETF approval from 50% to 35% and noted,

“I get all the reasons they SHOULD approve it (and we personally believe they should) but all the signs/sources that were making us bullish 2.5mo out for btc spot are not there this time.”

This highlights the sharp contrast between the Ether ETF and previous Bitcoin ETF approval processes, reflecting the SEC’s minimal communication. Public sentiment mirrored this, with Polymarket odds for Ether ETF approval dropping from 77% in January to 32% by May.

Bitcoin ETF vs Ethereum ETF

Furthermore, Grayscale is considering adding staking to its Ether ETF application, outlining proposals in a “consent solicitation statement” to investors.

The statement highlighted, 

“This proposal will allow the Sponsor to cause the Trust […] to use, or permit to be used, any Ethereum held by the Trust in a proof-of-stake validation protocol in exchange for consideration of any kind for the ultimate benefit of ETHE shareholders.” 

This highlights that Grayscale aims to ease inflationary pressures through staking, pending shareholder approval. If approved, Grayscale would align with ARK 21Shares, Franklin Templeton, and Fidelity, who recently integrated Ether staking into their ETF applications.

Overall, it would be interesting to observe the contrast as the SEC greenlighted ether futures-like ETFs but hasn’t approved spot or mixed ether ETFs, unlike Bitcoin ETFs last fall.