The approval of United States-based spot Ether exchange-traded funds (ETF) will depend on how quickly issuers can respond to comments from the Securities and Exchange Commission (SEC), says its Chair Gary Gensler.
Gensler’s comments appear to put the onus for approvals on Ether (ETH) issuers and indicate the SEC will not drag the process out as some feared.
On May 23, the SEC approved eight 19b-4 filings to list spot Ether ETFs on various U.S. exchanges, but they can’t start trading until they have the required S-1 registration statement approvals.
“These registrants are self-motivated to be responsive to the comments they get, but it’s really up to them how responsive they are,” Gensler said, according to a June 6 report from Reuters.
The remarks shed new light on Gensler’s comments only a day earlier on CNBC, where he said the next steps would “take some time.” Some believed this meant the SEC would take its time signing off on the S-1 Forms.
SEC Chair Gary Gensler on @CNBC Squawk Box this morning. Note the pivot from “all tokens are securities” to “tokens lack proper disclosure”.
— Alexander Grieve (@AlexanderGrieve) June 5, 2024
Cramer asked about other token ETFs, Gensler dodges as usual into crypto bankruptcies as an answer for why crypto bad, SEC good. pic.twitter.com/FmSZkwuTYW
Bloomberg ETF analyst Eric Balchunas said previously that the process could take weeks or months, though he’s tipped the first week of July as his base case.
Grayscale challenge influenced Ether ETF decision
The SEC has yet to explain why it appeared to change its tone on spot Ether ETFs just days before the first decision deadline.
However, Gensler hinted to Reuters that the move was influenced by Grayscale’s Bitcoin ETF legal challenge in 2023.
Grayscale successfully argued in court that because the SEC had approved Bitcoin (BTC) futures ETFs, there should be no reason to deny spot Bitcoin ETFs, which became instrumental in approving spot Bitcoin ETFs in January.
Speaking to Reuters, Gensler said that Ethereum’s case was similar and that the SEC staff “looked at these [Ether] filings, looked at the various correlations [...] the correlations are relatively similar to the correlations in the Bitcoin space.”
Alternate theory: Nancy Pelosi-linked SEC commissioner
Bloomberg ETF analyst James Seyffart — who was caught flat-footed by the approval after predicting its low likelihood for months — shared an alternate theory on X. He suggests the reversal on Ether ETFs was influenced by SEC commissioner Jamie Lizárraga, who has previous ties to an influential member of the U.S. Democratic Party, Nancy Pelosi.
“What I heard from other people was that this could have come from Lizarraga, who spent, I don’t even know, a very long time working — he used to be Nancy Pelosi’s right-hand man,” said Seyffart in the Bits+Bips podcast from Unchained.
Related: Why Ethereum ETF day one inflow won’t be like Bitcoin — Fireblocks MD
“And a lot of what I was hearing, even leading up to the ETH stuff, was that Dems [members of the Democratic Party] in the [U.S.] Senate and the House were really concerned with how the crypto polling was showing up and how many people own it.”
Pelosi was one of many House Democrats who supported the Financial Innovation and Technology for the 21st Century Act (FIT21) crypto bill, which passed a vote in the U.S. House of Representatives on May 22 in a “watershed moment” for crypto.
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