Ethereum Bulls Face Setback As Insiders Reveal SEC Set To Reject Spot Ether ETFs Next Month

Ethereum (ETH) bulls may be in for a disappointment. Reports are surfacing that the U.S. Securities and Exchange Commission (SEC) will most likely block the introduction of spot ether exchange-traded funds (ETFs) as soon as next month.

Discouraging Interactions With The SEC

According to an April 25 report from Reuters, anonymous sources familiar with recent meetings between potential ETF issuers and the Securities and Exchange Commission suggest the agency may be set to deny spot Ethereum ETFs during their final review in May.

Unlike the intense discussions preceding the SEC’s approval of spot Bitcoin ETFs in January, recent talks have been one-sided. According to four industry representatives who reportedly participated in the meetings, SEC staff did not engage in substantive details about the Ethereum ETF applications.

The sources also indicated that despite ETF applicants’ arguments that the greenlighted spot BTC ETFs and Ethereum futures-based ETFs establish a precedent, the SEC’s lack of detailed discussions with issuers suggests imminent denials.

VanEck, ARK Investment Management, BlackRock, Fidelity, and a slew of other issuers have filed paperwork with the SEC to launch ETFs that would track the price of ETH. The regulatory deadlines to decide on VanEck’s and ARK’s filings are May 23 and May 24, respectively.

In their previous remarks, JPMorgan analysts suggested that if the SEC refuses to approve the spot ETH proposals, the ETF issuers could sue the regulator, which may ultimately lead to these products being greenlighted through court intervention.

Before the landmark approval, the SEC stonewalled spot BTC ETF filings for over 10 years. It only changed its perspective after Grayscale Investments notched a major legal win against the regulator in August 2023.

Setback For Ethereum

The likelihood of SEC ETF rejection casts a dark shadow over the Ethereum market, as bulls had pinned hopes on the approval of spot BTC ETFs as a precursor to wider acceptance of crypto-based investment products. 

Moreover, there are reports that the SEC is seriously looking to designate Ethereum as a security. As ZyCrypto reported previously, the Ethereum Foundation revealed in February that it had received an inquiry from an undisclosed “state authority.” It was later revealed that it was indeed the SEC behind that request.

Implications For Ether Price

While Ethereum has registered a subtle 33% growth in value this year, it struggles to keep up with Bitcoin’s 47% increase and a recent move to all-time highs, reflecting market sentiment regarding the regulatory woes it faces.

Hong Fang, the president of crypto exchange OKX, told Reuters that uncertainty surrounding spot ETH ETF approvals would likely put bearish pressure on the price of ether. “There’s more downward pressure on prices as people build that expectation in,” Fang posited.

According to CoinGecko data, the ether price was hovering at $3,130 at press time, up 1.5% on the day.