Ethereum
Why the US elections will decide the fate of Ethereum ETFs – DL News
- Ethereum spot ETFs likely to be declined on May 23.
- Would-be issuers likely won’t sue the SEC — even if the strategy worked to push out Bitcoin ETFs.
- The US elections could be the key to approval.
The Securities and Exchange Commission will likely deny applications for Ethereum spot exchange-traded funds on May 23.
The lack of meaningful interaction with potential issuers, coupled with Ethereum’s ambiguous regulatory status, has made analysts pessimistic about the chances.
Not to mention the recent SEC investigation into the Ethereum Foundation.
That means spot Ethereum ETFs likely won’t see the light of day until late 2025, said Bloomberg Intelligence ETF analyst Eric Balchunas. DL News.
Faced with rejection, potential ETF issuers – like BlackRock, Fidelity or Ark Invest – have two options: either sue the SEC as Grayscale did for Bitcoin spot ETFs, or file a new application at a later date .
The US election also factors into the equation. If former President Donald Trump wins a second term in the White House, the SEC will likely face a change in leadership. And a new chair might be more crypto-friendly than Gary Gensler.
“If there is a new president, you file again,” Balchunas said. “Maybe you will be approved. Or you continue. Either way, it will still take a whole year to play out.
Sue the SEC
The SEC spent years rejecting applications for Bitcoin spot ETFs before Grayscale filed a lawsuit against the regulator in protest in 2022.
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In September, a judge ruled that the SEC had acted “arbitrarily and capriciously” in rejecting the requests. Four months later, Bitcoin ETFs were launched.
Nonetheless, the strategy is unlikely to be replicated for Ethereum ETFs. On the one hand, grayscale probably won’t bring fire to the SEC a second time, Balchunas said DL News.
Lawsuits are expensive, not only in terms of money, but also in terms of attention and bandwidth. And after suffering massive outflows when its Bitcoin trust was converted to an ETF, it would not be surprising if Grayscale did not aggressively pursue the conversion of its Ethereum trust.
Meanwhile, other potential emitters won’t dare take over and sue the regulator themselves, Balchunas said.
“None of these other companies want to piss off the SEC,” Balchunas said. “Grayscale was unique in that it was not a large ETF issuer. The rest of these companies have other activities and they are even more afraid. “No one else will intervene,” he added.
Election time
And why sue the SEC when the US presidential election scheduled for next November could resolve the problem?
While Trump is leading in some polls, the chances of a new SEC chairman being named are higher than expected.
“Trump is not necessarily pro-crypto,” Balchunas said. “Remember his former SEC chief, Jay Clayton, didn’t authorize this ETF either. So he won’t say, “Let’s go crazy.” But it will probably be even better for crypto and spot ETFs.
Assuming a new president is appointed in April or May and applications are submitted immediately thereafter, this could bring the approval or rejection deadline back to around December 2025.
Alternatively, issuers could try to file as soon as the election is over – or even before the results are known – to speed up the deadline.
What if Joe Biden won?
“In previous cycles, when they turned down spot Bitcoin ETFs, there was usually a cooling off period of about a year where no one did anything,” Balchunas said. “And then, all of a sudden, someone says, ‘Oh, to hell with that,’ and files again.”
“I guess the issuers will take the summer off, lick their wounds, just be disappointed, and then see what happens in the election,” he added.
Tom Carreras is markets correspondent for DL News. Do you have a tip on Ethereum ETFs? Contact us at tcarreras@dlnews.com