SEC’s Ethereum ETF Approval Delay Adds to Uncertainty

The US Securities and Exchange Commission (SEC) has postponed its decision on the Ethereum spot exchange-traded funds (ETFs) proposed by Hashdex and Ark 21Shares. In a notice filed on Tuesday, March 19, the new deadlines for deciding on the Hashdex and Ark 21Shares Ethereum spot ETFs are May 30, 2024, and May 24, 2024, respectively.

“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” the SEC said.

Furthermore, Several resolutions regarding Ethereum ETFs have been affected by this delay, including key filings from leading industry players like BlackRock, Fidelity, and Grayscale. However, recent sentiment shifted, with analysts sceptical about the possibility of approval.

Market Sentiment & Analyst Perspectives

For instance, ETF analyst James Seyffart has observed no dialogue between the SEC and the Ethereum ETF issuers raising concerns. Contrasting with the proactive discussions around Bitcoin ETFs, this lack of dialogue has led to a more pessimistic outlook for Ethereum ETFs.

“My cautiously optimistic attitude toward ETH ETFs has changed in recent months. We now believe these will ultimately be denied on May 23 for this round,” Seyffart posted.

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. The SEC hasn't engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5

— James Seyffart (@JSeyff) March 19, 2024

Moreover, the approval odds have diminished, with market predictions showing a significant decline in confidence. According to Polymarket, the likelihood of an Ethereum ETF approval in May has plummeted to 24%. This starkly contrasts the 75% odds following the SEC’s approval of spot Bitcoin ETFs in January.

Amid these developments, Coinbase has emerged as a vocal supporter of Ethereum ETFs. Last month, Paul Grewal, Coinbase’s chief legal officer, published a detailed letter outlining the rationale for approving an Ethereum ETF.

He emphasized ETH’s classification as a commodity. This view is supported by the Commodity Futures Trading Commission (CFTC) and various SEC and court decisions. This argument is part of a broader effort to demonstrate Ethereum’s market stability and viability as an ETF.

Grayscale’s Proposal & Stakeholder Vote

Grayscale revealed its plans to incorporate staking into its spot Ether ETF application. The consent solicitation statement contains the proposal to enable Grayscale ETH Trust to perform proof-of-stake validation protocols using ETH held by the trust.

However, Stakeholders have not successfully approved this intention, as it requires more than half of the shares to vote in favour of implementation. If the majority approves this motion, Grayscale will join issuers such as ARK 21Shares and Fidelity, which have integrated staking into their spot ETF applications.

Ethereum ETFs are still uncertain. The SEC has extended its decision timeline for the Hashdex Nasdaq Ethereum ETF. With market sentiment fluctuating, uncertainty looms over the approval prospects for spot Ethereum ETFs.

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