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Spot Ethereum ETFs Won’t Need a Lawsuit, Says Hester Peirce, But What Will They Need?

Last Updated January 24, 2024 10:04 AM
Teuta Franjkovic
Last Updated January 24, 2024 10:04 AM

Key Takeaways

  • Hester Peirce believes that spot Ether ETFs will not require legal action to be approved.
  • Several major players are vying for SEC approval for their spot Ether ETF applications.
  • There are mixed expectations for spot Ether ETF approval, with some experts optimistic and others cautious.

According to  SEC Commissioner Hester “Crypto Mom” Peirce, legal action won’t be necessary to persuade the United States Securities and Exchange Commission (SEC) to greenlight applications for spot Ether ETFs.

She emphasized that the regulator has taken lessons from its past errors, suggesting that the introduction of these products might proceed more seamlessly.

Peirce Notes Nuances In Judging Each Ether ETF Application

Peirce referenced the Grayscale court ruling, which set a precedent for the approval of spot Bitcoin ETFs in the U.S., stating: 

 “We shouldn’t need a court to tell us that our approach is ‘arbitrary and capricious’ in order for us to get it right.”

Hester Peirce, often referred to as “Crypto Mom” due to her relatively favorable view towards cryptocurrencies, mentioned that the SEC is likely to use the same precedent set by the Grayscale case in future considerations.

However, she recognized  that the specifics and context can differ greatly with each ETF application, indicating a nuanced approach to each case.

She commented :

“There’s a lot of work that goes into getting an exchange-traded product ready for market, including making sure that the disclosures are lining up with how the product actually works. Having heard from a court that the approach we were taking was wrong […] I think that kind of a lesson will certainly stick with us.”

BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, and Hashdex are among the key players seeking SEC approval for their spot Ether ETF applications. Eric Balchunas, a Senior ETF analyst at Bloomberg, recently estimated  a 70% chance of approval for a spot Ether ETF by May.

Ethereum ETFs: Anticipation Builds As Deadlines Approach

The SEC has specific deadlines  for deciding on these applications. VanEck’s application is due by May 23, followed by ARK 21Shares on May 24, Hashdex by May 30, Grayscale by June 18, and Invesco’s decision is due by July 5. Meanwhile, the applications from Fidelity and BlackRock are slated for decisions by August 3 and August 7, respectively.

Balchunas expressed  a strong likelihood of Ether ETFs receiving approval, especially in the wake of spot Bitcoin ETFs being approved. He finds it hard to envision a scenario where Ether ETFs wouldn’t be approved given the precedent set by Bitcoin ETFs.

He stated :

“The Ether spot is tied to the hip of Bitcoin spot for sure. It’s gonna go wherever it goes. It’s basically like on a 15-foot rope following it.”

Experts Divided on SEC’s Spot Ether ETF Outlook

Despite the optimistic outlook from some, not all industry experts share the same sentiment regarding the approval of spot Ether ETFs. Mark Yusko, the CEO of Morgan Creek Capital, is less hopeful , estimating the chances of approval at below 50%. He commented  that the SEC maintains a generally adversarial stance towards the crypto industry, which could impact the approval process.

This perspective is somewhat echoed by SEC Chair Gary Gensler, who emphasized in a letter dated January 11  that the approval of a spot Bitcoin ETF should not be interpreted as a blanket endorsement for other cryptocurrency ETF applications.

Gensler specifically stated :

“[The spot Bitcoin ETF approval] should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”

This comment suggests a cautious and case-by-case approach to the approval of cryptocurrency-related products by the SEC.

He commented :

“As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.”

Bitcoin ETF Approval Opens Doors for Ethereum’s Spot ETF Bid

The fact is, while BTC is primarily seen as a store of value, ETH serves as a functional currency, facilitating transactions on its highly composable chain. Despite their operational differences, ETH’s spot ETF approval remains a possibility. The growing liquidity crunch in global markets is being addressed by institutional demand for cryptocurrencies like Bitcoin, which is moving into wallets.

The debate over ETH’s security status becomes irrelevant once it transforms into an ETF, similar to many existing commodity ETFs. With BTC’s ETF approval, cryptocurrency has entered TradFi and is poised for institutional integration, paving the way for broader acceptance and potential approval of a spot ETH ETF.

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