If the SEC approves ether ETFs, will they also approve altcoin ETFs?

With the likelihood of the Securities and Exchange Commission (SEC) approving a spot ether ETF suddenly rising, altcoin investors are speculating on a possible flurry of approvals for additional coins.

In fact, just this morning, WisdomTree gained ground approval by the UK’s Financial Conduct Authority to list its 100% physically backed Ethereum ETP on the London Stock Exchange as early as May 28, although the products will not be available for retail investment.

The bullish momentum for ether, which is up 29% this week alone, could extend to other crypto assets.

On Monday, Bloomberg ETF analysts James Seyffart and Eric Balchunas said the likelihood of the SEC approving a spot ether ETF jumped from 25% to 75% thanks to the agency’s reported comment to at least one exchange and one applicant ETFs regarding their 19b- 4 Exchange Rule Change Request.

The Wall Street Journal confirmed the news while also CoinDesk cited three people familiar with the matter. Around the same time and without citing News 19b-4, Coinbase Institutional’s David Han wrote to Note adjusting his outlook for a spot ether ETF upward.

Barroni claimed SEC employees told exchanges “that is the case tending to approve themaccording to people familiar with the matter.”

As early as tomorrow, the SEC could approve a so-called 19b-4 filing which, along with a related S-1 filing due just weeks away, could lead to the listing of a spot ether ETF by investment manager VanEck.

Other ETF sponsors have also filed 19b-4 filings with the SEC for a spot ether ETF, including Fidelity, 21Shares, Invesco/Galaxy, and Franklin Templeton. VanEck requested the earliest response date: tomorrow.

Will a spot ether ETF lead to more altcoin ETFs?

Of course, ether is just one of many altcoins traded on US exchanges via trusts. There are over a dozen publicly traded trusts in the United States that hold alternative crypto assets: Litecoin (LTC), Chain (CONNECTION), Basic Attention Token (BAT), Bitcoin Cash (BCH), Decentralized (MANA), Classic Ethereum (ETC), Filecoin (PHIL), Polka dot (POINT), Horizon (ZEN), Stellar Lumens (XLM), Livepeer (LPT), Zcash (ZEC) and Solana (SOL).

So, if the SEC approved a spot ether ETF, could it also approve ETFs for additional altcoins?

The logic of altcoin proponents – arguing that non-ether altcoin spot ETFs could gain SEC approval shortly after an ether spot ETF – usually follows a simple argument: if the SEC allowed Grayscale to convert its bitcoin trust in an ETF, why would the commissioners deny fiduciary sponsors of other crypto assets from converting them into an ETF?

For obvious reasons, that argument could fail if the SEC claims that the cryptoasset is an unregistered security. However, the SEC has not classified all crypto assets held in US public trusts as securities.

Interestingly, many cryptocurrency trusts that trade on the OTC Markets, a US exchange, expressly maintain this SEC-designated unregistered securitiesIncluded SOL, MANAAND PHIL. Other crypto assets are it was rumored be SEC-designated unregistered securities: ZEN, XLM and ZEN.

However, There are some trusts trading on U.S. OTC markets that do not hold SEC-designated unregistered securitiesfor example POINT OR ETC trusts. Perhaps, if the SEC were to approve a spot ether ETF, the commissioners could approve spot ETFs based on possibly non-security crypto assets.

It’s worth noting that just because the SEC hasn’t classified a crypto asset as an unregistered security doesn’t mean it isn’t. Congress has not mandated the SEC to proactively classify all assets. Instead, the SEC simply chooses to accept or deny requests it receives, or take enforcement actions against illegal behavior on a case-by-case basis, as it has time, money, staff and resources.

The silence of the commissioners does not indicate a failure to appoint.

Of course, there is a counterargument against this logic. Unlike altcoins like DOT or ETC, only bitcoin and ether have futures contracts listed on the Chicago Mercantile Exchange (CME). This significantly sized ECM market for ether alone could be a compelling reason to only approve an ether spot ETF and not any other altcoin.

Spot Ether ETF: No longer an obvious SEC reject?

The SEC’s Trading and Markets Division has requested amendments to the joint Form 19b-4 of the exchange and the sponsor, likely VanEck, according to sources at Bloomberg, Barron’s and the Wall Street Journal. This is a bullish sign for a possible spot ether ETF approval because, from the perspective of market observers, the SEC is generally silent or uninterested in 19b-4 filings if it intends to reject them.

Since the SEC is asking for a new application, the reasoning is: his interest is probably a positive development.

A Bloomberg ETF analyst believes Ether will likely get SEC spot ETF approval.

Many viewed the SEC’s stance on a spot ether ETF as decidedly negative. Joe Lubin’s ConsenSys even sued the SEC claiming that commissioners had secretly classified ether as an unregistered security.

Therefore, if the SEC was actually considering the possible approval of a spot ETF on Ethereum, it would be a clear change of tone.

To know more: ConsenSys says the SEC has designated ETH as a security, but won’t say where

In the midst of all these media reports, the price of ether has increased by 29% in the last seven days – outperforming Bitcoin’s 12% rally by a further 17%.

Form 19b-4 asks applicants for information necessary for the public to understand why the SEC should change the Section 19(b)(1) rules under the Securities Exchange Act of 1934. In this case, the exchange and a sponsor of the ‘ETFs need to explain why the SEC should allow ether to be used as the sole asset of a spot ETF.

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