Cryptocurrencies

The fate of these Ethereum (ETH) spot ETFs could be decided

The fate of Ethereum (ETH) spot ETFs could be decided this week by a single vote from Gary Gensler, Chairman of the US Securities and Exchange Commission – if history is any indication.

In January, approval of spot Bitcoin ETFs reached a panel of five commissioners. Two crypto-friendly commissioners, Hester Peirce and Mark Ueda, voted in favor of approving the ETFs, while commissioners Carolyn Crenshaw and Jaime Lizarraga voted against.

Gensler also voted for its approval, leading many to believe that his vote ultimately secured approval of spot Bitcoin ETFs, which were approved by a 3-2 vote on January 10, 2024.

SEC final votes on Bitcoin exchange-traded fund. Source: SEC

This week, the same five SEC commissioners are scheduled to cast votes to either approve or reject VanEck’s ETF on May 23. Here’s what we know about them.

Hester Pierce

Pearce earned the nickname “Crypto Mom” for a reason – she is bullish on digital assets and wants to see more decentralization integrated into the broader financial system.

It has not confirmed how it will vote on spot ETFs.

However, she has made herself part of the Ethereum community, after attending and speaking at ETHDenver in Colorado in late February.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Hester Pierce (left) speaks at ETHDenver. Source: ETHdenver

Pierce has criticized the SEC’s approach to overseeing the cryptocurrency industry in the past, calling some parts of the securities regulator’s approach “unproductive” and “useless.”

Carolyn Crenshaw

Crenshaw is a vocal critic of the cryptocurrency industry and was a vocal opponent of the immediate Bitcoin ETF decision.

At the time, Crenshaw said the price of Bitcoin ETFs would be affected by fraud and market manipulation in the broader industry — and by approving Bitcoin products, the SEC would be failing to protect American investors.

There is no evidence to suggest that Crenshaw has changed her mind about spot cryptocurrency ETFs since then.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Carolyn Crenshaw. Source: SEC

“There is no regulatory oversight of these markets, and no other adequate mechanisms to detect and deter fraud and manipulation,” Crenshaw said in opposition to Bitcoin ETFs.

She added: “(Spot trading) is fragmented and spread across different international trading venues, with many markets not subject to meaningful regulation.”

Mark Ueda

Aside from Pierce, Ueda was the only other commissioner to criticize the SEC for its “regulation by enforcement” approach to the cryptocurrency industry.

He disagreed with the SEC’s decision to deny Coinbase’s petition last December, which accused the agency of acting arbitrarily and capriciously in its refusal to design rules to clarify oversight of the industry.

Ueda also voted in favor of approving Bitcoin exchange-traded funds, but expressed “strong concerns” about how the SEC reached its decision.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Mark Ueda (right) speaks at the Milken Institute conference. Source: Eleanor Terret

He claims the commission deviated from the “significant market” test it uses to decide on exchange-traded products and instead approved bitcoin exchange-traded funds under “other means.”

Ueda called the SEC’s reasoning “flawed” but cited “independent reasons” behind its decision to vote in favor of spot Bitcoin ETFs.

However, it is not clear what these “independent reasons” are, let alone whether they would apply to Ethereum ETFs as well.

Jaime Lizarraga

Lizárraga voted against approving Bitcoin exchange-traded funds and was the only commissioner who did not issue a statement following the decision.

However, he reportedly said that Bitcoin’s promise “as a viable alternative to traditional finance” and “true financial inclusion” had not been delivered in a speech he gave at Brooklyn Law School in November 2022.

At the time, he disputed the idea that the SEC was adopting a “regulation by enforcement” approach to the cryptocurrency industry.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Jaime Lizarraga. Source: SEC

It is also believed that most cryptocurrencies are subject to US securities laws and, as a result, operate illegally.

There is no evidence to suggest that he has changed these views since approving the Bitcoin ETFs.

Gary Gensler

While Gensler voted to approve Bitcoin ETFs in January, some speculate he was forced to do so because Grayscale had won its appeal against the regulator months earlier.

There is no indication whether it will treat the current series of Ether ETF applications in the same way.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Gary Gensler speaks with CNBC about cryptocurrency regulation. Source: CNBC

Earlier this month, Gensler confirmed that the SEC’s decision was still under review in a May 7 interview with CNBC:

“This is something that is before our committee now. We are a five-member committee, and these filings will be considered in due course.

Gensler was also recently accused of avoiding answering whether Ethereum serves as a security — even when asked by Congress.

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
Ether ETF filing deadlines before the SEC. source: James Seyphart

Meanwhile, there are other potential wrinkles in the works. There is an investigation into Ether’s status as a potential security tool – led by SEC Enforcement Division Director Gurbir Grewal.

A few fund managers also claimed that the SEC was less involved with Ethereum ETFs. A few fund managers now expect the SEC to reject this week, a lawyer for one of those applicants, Bitwise, reportedly said.

Related: Gary “Troll” Gensler’s Resignation Disappoints at Crypto X

More recently, ETF Shop President Nate Geraci noted that it is technically possible for the SEC to approve 19b-4 applications (exchange rule changes) but prevent an immediate launch by delaying S-1 applications (registration statements).

The Fate Of These Ethereum (Eth) Spot Etfs Could Be Decided
source: Nate Geraci

Bloomberg ETF analysts Eric Balchunas and James Seyphart expect a 25% chance of at least one Ethereum ETF spot being approved on May 23 — that number is down from 70% since January.

magazine: Cryptocurrency Regulation: Does SEC Chairman Gary Gensler Have the Final Say?

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