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Ethereum's ETF Hopes Dampened by SEC Delays and Security Classification Concerns

Despite anticipation, SEC's delays in Ethereum ETF decisions and subpoenas to firms linked to the Ethereum Foundation quashed any expectations for an ETF approval in May.

  • The approval of 11 spot Bitcoin ETFs earlier this year led to Bitcoin reaching a new ATH of over $73,000, with Ethereum now aiming to join the ETF market.
  • The SEC has postponed the decision on spot Ethereum ETF applications from Hashdex and Ark 21Shares until late May, with expectations for the VanEck spot ETH ETF decision on May 23.
  • As Ethereum seeks ETF approval, the SEC is probing the Ethereum Foundation and issuing subpoenas to potentially classify Ether as a security.

Earlier this year, the entire market and community enjoyed the advantages stemming from the approval of 11 spot Bitcoin ETFs. Bitcoin even soared to a new all-time high of over $73,000. Now, Ethereum is joining the ETF frenzy. 

However, the path seems a bit more challenging for Ethereum. As, on March 11, Fox Business reporter Eleanor Terrett mentioned in a post on X (formerly known as Twitter):

“Optimism about the @SECGov approving the $ETH spot ETFs by May 23rd is waning. Based on my conversations with people familiar, meetings in recent weeks have been very much one sided, with issuers and custodians trying to rally SEC staff to get the process rolling, but staff not really engaging in meaningful ways like they did with the $BTC spot ETF applications.”

On March 20, the U.S. Securities and Exchange Commission (SEC) delayed its decision on approving spot Ethereum ETFs from Hashdex and Ark 21Shares, moving the final judgment for both to late May; Ark 21Shares will hear back on May 24, and Hashdex on May 30.

The initial key deadline is for the VanEck spot ETH ETF on May 23, expected to set the tone for the decisions on later applications.

Despite the anticipation, the recent series of SEC deferrals has quashed any expectations for a spot Ethereum ETF approval in May. In fact, Bloomberg ETF analyst James Seffart shared his insights on X. 

While the Ethereum ETF saga is still facing complexities, the SEC has reportedly sent out subpoenas to various U.S.-based companies as part of its efforts to potentially classify Ether as a security. 

This move comes in the wake of an investigation into the Ethereum Foundation, hinted at through a GitHub post suggesting scrutiny by a state authority. A March 20 report from Fortune highlighted the SEC's investigation could extend its regulatory reach over Ether, especially after Ethereum's shift from proof-of-work to proof-of-stake in 2022. 

These companies have been asked to submit documents and financial records linked to their interactions with the Ethereum Foundation, indicating a concerted effort by the SEC to explore the regulatory status of ETH.

Edited by Harshajit Sarmah