SEC delays decision on BlackRock’s spot Ethereum ETF

The United States Securities and Exchange Commission (SEC) has postponed its decision on BlackRock’s proposed spot Ethereum (ETH) exchange-traded fund (ETF) a day ahead of the deadline, citing the need for more time to consider the implications of the proposed rule change.

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” Sherry Haywood, the SEC’s assistant secretary, said in a January 24 filing.

The delay comes one day ahead of the January 25 deadline, which in turn comes 45 days after Nasdaq filed for an iShares Ethereum Trust (on BlackRock’s behalf) on December 11, 2023.

The SEC now has 45 more days, until March 10, 2024, to consider whether to approve or reject the spot ETH ETF. At this point, “the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change,” Haywood said.

However, it’s possible, and indeed likely, that the final decision will not come in March, as this delay is just the first of several delays the SEC can exercise across a 240-day period, and Blackrock’s spot ETH ETF application is not the only one pending.

VanEck and Ark 21Shares’ ETH ETF applications have a final decision deadline of May 23 and May 24, respectively, and applications from Grayscale Investments, Invesco Galaxy, and Fidelity have final deadlines of June 18, July 5, and August 3, respectively.

This has led some to speculate that the SEC will make a final decision on all the pending spot Ether ETFs at once—similar to how it decided on ten pending spot BTC ETFs on January 10 —and that this decision will come in May.

“Next date that matters is May 23rd,” said Bloomberg ETF analyst James Seyffart on X (formerly Twitter) on January 25, adding that he expects to see more spot ETH ETF delays “sporadically” over the next few months.

As well as the date of the SEC’s final decision, the outcome is also very much up in the air.

Pro-ETF optimists will recognize the tune the SEC is playing as reminiscent of the one they heard in the lead-up to the approval of the spot BTC EFTs, a decision which was also delayed several times to give the regulator “sufficient time to consider the proposed rule change.”

This isn’t necessarily a concrete indication that the SEC will eventually approve the spot ETH ETF, but it at least suggests a delay is not a bad sign for fans of the potential new product.

Another factor in its favor is recent comments from SEC Commissioner Hester Peirce—also known as ‘Crypto Mom’ for her perceived kinder take on the digital asset industry than SEC chair Gary Gensler. When discussing the recent approval of spot BTC ETFs and the upcoming decisions on spot Ethereum ETFs, in a January 24 interview with Coinage Media, Peirce stated that “we shouldn’t need a court to tell us that our approach is ‘arbitrary and capricious’ in order for us to get it right,” adding “that’s not how we’re going to do our approvals.”

However, it’s by no means a forgone conclusion that spot Ethereum ETFs are just a matter of time, and neither is it obvious that what’s true for BTC is true for Ethereum.

Those betting their houses on an imminent approval of a spot ETH ETF should keep in mind that SEC Chair Gary Gensler has publicly stated that the BTC ETF approval “should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.” Combine this with his unwillingness to definitely say whether ETH is a commodity, like Bitcoin, or a security—as New York’s Attorney General believes it is—and suddenly approval of the ETF doesn’t look so inevitable. 

For Gensler, one of the key distinguishing factors between Bitcoin and Ethereum is the latter’s controversial shift from a consensus mechanism based on proof-of-work (PoW) to one based on proof-of-stake (PoS).

As Gensler told reporters last March, individuals “locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing,” were “investing anticipating a return,” thereby ticking one of the key boxes of the Howey test for identifying securities.

Gensler has also suggested many times that all digital assets are likely securities according to the Howey Test, except for Bitcoin. Based on this, he may have felt he lacked the grounds to reject a BTC ETF, particularly after last summer’s federal appeals court order
overruling the SEC’s initial rejections of Grayscale’s bid to convert GBTC from futures-based to spot-based. However, because Gensler has been far coyer about exempting ETH from his definition of what constitutes a security, he may not feel the same obligation to approve the spot Ethereum ETF.

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