Is the Ethereum Spot ETF Expected to Be Approved? Industry Opinions Vary

More than a month after the U.S. Securities and Exchange Commission (SEC) approved 11 Bitcoin Spot ETFs, the crypto industry is now anticipating that the Ethereum Spot ETF may receive similar approval as early as May.

According to a series of interviews, the outlook for the approval of the world's second-largest digital asset Spot product in 2024 is optimistic. Not only the cryptocurrency industry, but also some securities lawyers and traditional Wall Street participants hold the same view.

However, there are also skeptics. Some people point out that the SEC chairman's stance on the legality of Ethereum is somewhat ambiguous, believing it may be an unregistered digital security, and therefore not suitable for an ETF. Another concern is that, compared to Bitcoin, Ethereum lacks sufficient foundational and institutional support in the financial industry.

Nevertheless, multiple securities lawyers have stated that the legal precedents established during the approval process for Bitcoin Spot ETFs provide a blueprint for the approval of Ethereum ETFs. Marc Powers, a blockchain professor at Florida International University School of Law and former SEC enforcement attorney, believes that when the same factors at play in the Bitcoin Spot ETF approval come into effect here as well, the SEC will find it difficult to present new arguments to reject the Ethereum Spot ETF.

Due to a cryptocurrency asset management company winning an appeal against the SEC in August, nearly ten Spot Bitcoin ETFs were approved on January 10. The D.C. Circuit Court of Appeals supported the company's view, stating that the SEC's rejection of its application to convert its Bitcoin trust into a Spot ETF was "arbitrary and capricious."

The SEC approved a Bitcoin futures ETF in 2021, but the court questioned its claims about the essential differences between Spot ETFs and futures ETFs, and that the risks are greater. This ruling is seen as a significant watershed moment for the cryptocurrency industry and a signal for other issuers to launch Bitcoin Spot products.

SEC commissioner Hester Peirce publicly stated that the commission should not ask the court to allow it to approve products that people want to invest in. Another reason supporting the Ethereum Spot ETF is the growing demand from major Wall Street firms, with multiple companies having applied to launch related products.

Andrew Keys, co-founder of DARMA Capital, pointed out that Ethereum is a unique product, and many companies building applications on its blockchain see long-term commercial value. Ethereum and Bitcoin account for over 50% of the global cryptocurrency market.

Experts also pointed out that the existence of the Ethereum futures market is another reason why the SEC finds it difficult to reject spot ETFs. Marc Powers stated that the CME Bitcoin futures market provides oversight tools to guard against spot market manipulation, which is a key factor in approving Bitcoin ETFs. The CME launched Bitcoin futures in 2017 and Ethereum futures in 2021.

However, some believe that the approval of an Ethereum Spot ETF in 2024 is overly optimistic. The SEC chairman's ambiguous stance on whether Ethereum is a security is seen as a dangerous signal. After Ethereum upgraded to the PoS mechanism in 2022, it sparked speculation about the status of its tokens.

An analyst from an investment bank believes that the SEC will eventually approve an Ethereum Spot ETF, but it may have to wait until after the November elections. They believe that the political ambitions of the SEC chairman may influence his decisions.

The SEC declined to comment on this but stated that any updated documents can be found on its official website.