Crypto investors enjoyed good times at the end of 2023 and the beginning of 2024, buoyed by the excitement of the Spot BTC ETF victory. However, more is needed. The SEC must also approve the ETH ETF, which is expected to garner as much interest as the BTC ETF and is predicted to perform even better. Today was decision day for another ETF, and the SEC made its announcement.
Spot ETH ETF Decision
On October 20, 2023, the SEC initiated a new comment period for the application to trade on the Cboe exchange. This means a decision on the ETF has been postponed. The application, made by Galaxy and Invesco, has the SEC asking for answers to some questions from commentators.
- Considering the nature of the underlying assets held by the Trust, has the Exchange appropriately presented its proposal for the Shares to be listed and traded under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares?
- The Exchange is largely putting forward similar arguments for the listing and trading of the Shares as those made for spot Bitcoin products (“Bitcoin ETPs”). Do commentators agree that the arguments supporting the listing of Bitcoin ETPs are equally valid for the Shares? Are there specific features of Ether and its ecosystem, including the proof of stake consensus mechanism and the potential concentration of control or influence by a few individuals or organizations, that create unique concerns about Ether’s susceptibility to fraud and manipulation?
- What are the commentators’ views on whether the proposed Trust and Shares are susceptible to manipulation? What are the general views of the commentators on whether the Exchange’s proposal is designed to prevent fraudulent and manipulative acts and practices?
- Based on the data and analysis provided by the Exchange, do commentators agree with the Exchange that the Chicago Mercantile Exchange (“CME”) trading CME Ether futures represents a significant regulated market for spot Ether?
- What are the commentators’ views on the likelihood of someone attempting to manipulate the Shares also having to trade on the CME to manipulate the Shares?
The postponement decision, signed by Sherry R. Haywood, seeks answers to the previous questions. In particular, the transition to Proof of Stake (PoS) continues to raise questions for the SEC about the possibility of ETH being classified as a security. Additionally, the concentration of staking in the hands of centralized entities is seen as a significant risk.
