Ethereum ETF Approval Odds Hover Around 50%

Bitcoin’s Wall Street debut has inspired a flurry of predictions on spot Ethereum ETFs

By: André Beganski

January 16, 2024

Spot Bitcoin ETFs have traded on Wall Street for less than a week, but executives and analysts are already lining up to opine on the prospect of a spot Ethereum ETF. So far, the focus has been on whether one could launch in the U.S. sometime this year.

Fox Business Reporter Eleanor Terrett told Coinage in an interview on Tuesday that she isn’t holding her breath for crypto’s second-largest coin in 2024. Pointing to comments made by Securities and Exchange Commission Chair Gary Gensler, she described last week’s approval of spot Bitcoin ETFs as potentially atypical.

“I would tend to err more on the side of below 50% because I think this was sort of like a one-off,” she said. “Gensler has said previously [...] that Bitcoin is definitely a commodity. Where we stand on Ethereum is kind of unclear right now.”

As examples of uncertainty, Terrett highlighted Gensler’s attempt to sidestep questions about Ethereum’s regulatory status on Capitol Hill last April. (Gensler couldn’t tell House Financial Services Committee Chair Patrick McHenry whether or not Ethereum is a security or a commodity.) She also underscored Gensler’s claim last February that “everything other than Bitcoin” could fall within the SEC’s regulatory domain.

“Every single interview he does [and] every single hot-seat appearance on Capitol Hill, he has no answer as to whether Ethereum is a security or not,” Terrett said of Gensler. “Whether that has any bearing on whether we'll see an ETF this year, we'll have to see.”

Before spot Ethereum ETFs can be approved, the SEC would need to classify the coin as a commodity, JPMorgan’s Nikolaos Panigirtzoglou told The Block last week, adding that there’s less than a 50% chance of that happening before May.

The Securities and Exchange Commission dragged its feet on approving a spot Bitcoin ETF for over a decade, citing market manipulation as a major concern. It wasn’t until the SEC was sued by Grayscale Investments that a court found the agency’s basis for repeated ETF denials was “arbitrary and capricious,” Terrett pointed out.

However, Bloomberg Intelligence ETF Analyst James Seyffart disagrees with Terrett’s odds. He told Coinage in an interview last week that there is more than a 50% chance that the SEC will approve applications for spot Ethereum ETFs this year.

Seyffart said the SEC implicitly accepted that Ethereum is a commodity when it approved futures-based ETFs for Ethereum last October. Approving futures-based ETFs but not spot ETFs for Bitcoin garnered scrutiny in court for the SEC last year when it lost its lawsuit to Grayscale over the firm’s Bitcoin Trust.

“I think that there’s a decent chance that a spot ETH ETF gets approved in 2024,” he said, adding that the SEC will have to decide on two applications from VanEck and Ark Invest by May 23rd. “They are implicitly accepting [Ethereum] as a commodity.”

Still, Seyffart recognized that a spot in Ethereum ETF would likely require more nuance than its Bitcoin-centric counterpart, noting that Ethereum plays a crucial role in how transactions are verified on Ethereum’s network through staking.

“Ethereum is a completely different asset” compared to Bitcoin, Seyffart said. “It has staking — there’s a whole bunch of issues that [...] Gensler might not be okay with.”

Speaking from the World Economic Forum in Davos, Switzerland, Ripple CEO Brad Garlinghouse said that Ethereum will likely follow Bitcoin on its path toward a spot ETF. However, he declined to provide a timeline for when such a product could come.

“I think it’s a certainty,” he said during an interview with CNBC. “I’m not going to put a horizon on the time, but there will be other ETFs, for sure.”

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