The Securities and Exchange Commission on May 23 approved applications to list and trade shares of spot ether exchange-traded products after what appeared to be its sudden — and to some, politically driven — pivot.
The SEC approved so-called 19b-4 applications relating to the Grayscale Ethereum Trust, the Bitwise Ethereum ETF, the iShares Ethereum Trust, the VanEck Ethereum Trust, the ARK 21Shares Ethereum ETF, the Invesco Galaxy Ethereum ETF, the Fidelity Ethereum Fund and the Franklin Ethereum ETF, according to a May 23 order.
“Everything I’m hearing, this was a political 180,” said Bloomberg Intelligence Senior ETF Analyst Eric Balchunas during a May 22 Space on X, formerly Twitter, hosted by The Block. He added that “everything that we’ve been hearing indicates that even the staff was surprised.”
Balchunas credited his colleague, Bloomberg Intelligence ETF Research Analyst James Seyffart, for, until recently, keeping Bloomberg Intelligence’s estimate for the likelihood of spot ether ETF approval by May 23 at 25%. The SEC had designated May 23 as the date by which it shall either approve or disapprove a proposed rule change relating to the VanEck ETF.
“I wanted to go lower,” Balchunas said. “I felt that it was just so bleak, and everything pointed to denial.”
However, in a May 20 post on X, Balchunas said he and Seyffart, were “increasing our odds of spot ether ETF approval to 75%” after “hearing chatter this afternoon that SEC could be doing a 180 on this.”
Seyffart also spoke during The Block’s X event.
“There were ways that they could have denied that would have kicked this can down the road in my view,” said Seyffart, who, like Balchunas, referenced apparent surprise on the part of SEC staff.
“I have multiple confirmations that there were plenty of people (on) the staff that didn’t know about this till late last week, some people didn’t know till this week,” he said. “If that was the case, then that means … the five-member commission decided they were going to approve these and didn’t tell anyone at the SEC.”
Chris Perkins, a managing partner and president of cryptocurrency investment firm CoinFund, who also spoke during The Block’s X event, said the political pressure on the SEC likely started when former President Donald Trump made crypto a campaign issue.
“What followed there was Mark Cuban, and Mark Cuban said, 'Hey Democrats, if we don’t get our act together, we’re going to lose this election,'” Perkins said.
In May 10 post on X, Cuban, a billionaire, wrote that if President Joe Biden loses, "there is a good chance you will be able to thank @GaryGensler and the @NewYork_SEC." Gensler is chair of the SEC.
Perkins also pointed to a study released May 7 by Digital Currency Group. The study found that more than 20% of voters in key battleground states cited crypto as a major issue in the 2024 election.
Perkins added that “this very, very energized crypto community, could make a difference in these swing states.”
Sudden pivot
In a May 21 research alert, Alex Thorn, head of firmwide research at Galaxy Digital, said that on May 20, the SEC returned comments to exchanges and prospective ether ETP issuers seeking an expedited response by 10 a.m. EDT on May 21.
“The sudden activity, after months of silence, marked a significant shift in engagement that dramatically enhances the likelihood of 19b-4 approval this week,” the alert said, adding that Galaxy expected approval would come on May 23.
While the proposals may be approved, the ether products won't start trading right away.
The Galaxy report added that while the 19b-4s are likely to be approved this week, “we do not expect S-1s to go effective for weeks to months, resulting in no exchange-tradeable (ether) spot vehicles until this summer.”
