Witness a Major Event in the Crypto World Tomorrow! Does the SEC's "Sudden Action" Hint at Approval for a Spot Ethereum ETF?

According to a report from North America on Tuesday (May 21), three insiders indicated that SEC officials on Monday unexpectedly requested Nasdaq and CBOE to swiftly update and amend their spot Ethereum ETF listing application documents. This request is typically made before approval, implying that the agency might be preparing to approve the applications from these two companies.

The SEC must decide by the end of this week whether to approve the VanEck and ARK Investments/21Shares ETF listing applications submitted by CBOE. The exchanges require SEC approval of their amended rules to list the products, and the issuers still need SEC approval of the ETF registration statements before trading can commence. Unlike the exchange-submitted documents, the SEC does not have a set timeline for its decision, meaning it could still take several months before a spot Ethereum ETF begins trading.

Market-impacting speculation about ETFs is partly driven by renewed investor enthusiasm for similar U.S. Bitcoin funds, whose listing in January spurred the largest digital asset to new heights.

Ether surged nearly 14% on Monday, marking its biggest gain since November 2022, and continued to rise, with Bitcoin climbing to $72,000 on Tuesday.

According to insiders, the SEC contacted at least one exchange and one potential spot Ether ETF issuer to update the relevant 19b-4 filing documents. Due to the matter's private nature, the sources requested anonymity. One insider suggested that the likelihood of SEC approval might be increasing, adding that this unexpected conversation does not guarantee approval.

ETF Paperwork

The 19b-4 document is just one part of the necessary paperwork. Issuers also need regulatory approval of the S-1 registration statement before launching the product. A decision on at least one spot Ether ETF application is expected by May 23.

An SEC spokesperson stated that the agency does not comment on individual filings.

Speculation on social media is rampant: "The SEC may be more inclined to approve, and traders are now scrambling to position themselves because many had completely ruled out the possibility of approval, even a small one," said Chris Newhouse, an analyst at Cumberland Labs.

Ether is the native token of the Ethereum blockchain, one of the most critical commercial highways in cryptocurrency. This network is popular in decentralized financial services, where investors trade and lend through automated software protocols rather than traditional intermediaries.

Increased Likelihood of Spot Ethereum ETF Approval

On Monday, Bloomberg Intelligence ETF analyst Eric Balchunas noted that he and his colleague James Seyffart had raised the estimated probability of spot Ethereum ETF approval from 25% to 75%.

Related Developments

Bloomberg reported last Friday, citing two insiders, that some fund companies initially expected rejection because their private negotiations with the SEC were not as intense as those before the launch of the spot Bitcoin ETF.

Some investors remain cautious. Ravi Doshi, head of markets at FalconX, said their derivatives department found that most of their trading counterparts downplayed this move, expecting SEC action to be slower than the market anticipated.

The skeptical SEC has been cracking down on cryptocurrencies but grudgingly allowed the U.S. spot Bitcoin ETF earlier this year after a 2023 court reversal. Products from companies like BlackRock Inc. and Fidelity Investments have accumulated $58.8 billion in assets, making it one of the most successful fund debuts ever.

BlackRock and Fidelity are also looking to launch Ethereum funds. The digital asset industry views ETFs as a way to expand the investor base for cryptocurrencies. Retail investors, hedge funds, pension funds, and banks have all invested in Bitcoin funds—Millennium Management, Steven Cohen's Point72 Asset Management, and Elliott Investment Management are among the buyers.