The sudden progress in the SEC's filing process appears more like a "delaying tactic" in response to political dynamics rather than a definitive sign that Ethereum spot ETFs will ultimately gain approval.
This morning, reports emerged that the U.S. Securities and Exchange Commission (SEC) has urged exchanges to expedite updates to their 19b-4 filings. Following these rumors, Bloomberg ETF analysts Eric Balchunas and James Seyffart raised the approval odds for a spot Ethereum ETF from 25% to 75%, later clarifying that the 75% probability specifically refers to the likelihood of 19b-4 approval.
In response to this news, Ethereum's price surged past $3,600, peaking at $3,693—a 24-hour increase of over 19%.
SEC’s Sudden Move: A Political "Stalling Tactic"?
According to CoinDesk, three sources familiar with the matter revealed that the SEC has requested exchanges to accelerate updates to their 19b-4 filings. This suggests potential approval ahead of the critical deadline on May 23 (VanEck’s cutoff date). A company engaged in discussions with the SEC noted that while regulators had been delaying progress for weeks, they now seem to be aligning toward approval.
However, this does not guarantee ETF approval. Prospective issuers must also secure approval for their S-1 filings before products can begin trading. Unlike 19b-4, the SEC faces no deadline for S-1 approvals, meaning the process could take weeks or even months.
Bloomberg Intelligence analysts Eric Balchunas and James Seyffart revised their approval odds from 25% to 75% after hearing rumors of the SEC’s shifting stance. However, Balchunas later emphasized that the 75% probability applies only to 19b-4 approval by May 23. Issuers still require S-1 clearance, which could extend the timeline indefinitely.
Key Terminology Explained:
- 19b-4 Filings: Submitted by exchanges, these documents propose rule changes (e.g., new products, trading mechanisms). The SEC reviews them and solicits public feedback before deciding on approval.
- S-1 Filings: Required for public stock offerings, these disclosures detail a company’s financials, operations, risks, and pricing.
Eric Balchunas hinted on Twitter that the SEC’s abrupt reversal may stem from escalating political pressures.
ChainCatcher previously reported that Donald Trump has advocated for keeping crypto businesses in the U.S. and began accepting cryptocurrency campaign donations. Meanwhile, 12 Democratic senators joined Republicans in overturning the SEC’s SAB 121—a potential shift toward courting pro-crypto voters ahead of the November 5 election.
Given this uncertain landscape, the SEC’s push for expedited 19b-4 updates may serve as a temporary measure, with S-1 approvals delayed indefinitely.
Repeated Delays Leading to a Final Deadline
Previously, the SEC postponed decisions on multiple Ethereum spot ETF applications:
- On May 7, the SEC deferred its ruling on Invesco Galaxy’s Ethereum spot ETF to July 5, citing the need for "additional time to consider proposed rule changes."
- Over the past two months, the SEC delayed decisions on filings from Fidelity, Hashdex Nasdaq, ARK 21Shares, Grayscale, Franklin Templeton, VanEck, and BlackRock—all pushed to May 23.
Ethereum spot ETF applications follow a 240-day review cycle divided into four phases (45, 45, 90, and 60 days). If the SEC denies VanEck’s 19b-4 filing by May 23, issuers must restart the process, potentially pushing approvals to late 2024 or early 2025. Legal challenges could arise, mirroring the court rulings that ultimately enabled Bitcoin spot ETFs.
Current Ethereum Spot ETF Applicants:
| Issuer | SEC Decision Deadline |
|---|---|
| VanEck | May 23, 2024 |
| ARK 21Shares | May 23, 2024 |
| Hashdex | May 23, 2024 |
| Grayscale | May 23, 2024 |
| BlackRock | TBD |
"Ethereum Spot ETFs Still Carry Risks"
The SEC and analysts caution that Ethereum spot ETFs face unique risks compared to Bitcoin ETFs, including concerns over:
- Ethereum’s Proof-of-Stake (PoS) mechanism.
- Price manipulation vulnerabilities.
- Potential classification as securities.
Fineqia International analyst Matteo Greco highlighted liquidity worries in ETH markets and the SEC’s prior securities designation as hurdles. Notably, the SEC’s limited engagement with issuers contrasts sharply with its proactive meetings ahead of Bitcoin ETF approvals.
Despite these challenges, many industry leaders believe Ethereum ETF approval is inevitable. 21Shares President Ophelia Snyder noted that Ethereum applications mirror Bitcoin’s in structure, custody, and disclosures. Hong Kong’s approval of Ethereum spot ETFs in April—though small-scale—sets a regulatory precedent for the U.S.
👉 Discover how Ethereum ETFs could reshape crypto investments
FAQ Section
1. What’s the difference between 19b-4 and S-1 filings?
- 19b-4: Exchange-submitted proposals for rule changes (e.g., listing new products). The SEC must approve these for trading to begin.
- S-1: Registration statements for public offerings, requiring detailed financial disclosures. No fixed deadline exists for approval.
2. Why did the SEC suddenly shift its stance?
The reversal may reflect political pressures, including election-year dynamics and bipartisan support for crypto-friendly policies.
3. When will Ethereum spot ETFs launch if approved?
After 19b-4 approval, S-1 clearance could take weeks to months. Trading may begin only after both are secured.
4. What risks do Ethereum ETFs pose?
Concerns include PoS centralization, market manipulation, and regulatory ambiguity around Ethereum’s classification.
5. How does Hong Kong’s approval impact the U.S.?
Hong Kong’s Ethereum ETFs, though nascent, demonstrate regulatory viability and may influence SEC decision-making.