According to investment bank TD Cowen, the US Securities and Exchange Commission (SEC) is unlikely to approve spot Ethereum ETFs in the near future.
The bank's Washington Research Group, led by Jaret Seiberg, noted in a recent note that the SEC will likely want to gain experience from Bitcoin ETPs before approving an Ethereum or other crypto token ETP.
The initial deadline for approval of such funds is in May, but TD Cowen suggests approval may not come until after the 2024 US presidential election. The SEC's approval of spot Bitcoin ETFs earlier this week comes more than a decade after the initial filing and 26 months after it gave the green light to Bitcoin futures ETFs in October 2021.
SEC Chairman Gary Gensler said that while approving spot Bitcoin ETFs, a federal court left the agency no choice but to approve these funds because the SEC lost a lawsuit filed against it by Grayscale Investments. Gensler maintains the view that “the vast majority of cryptocurrencies are investment contracts and are therefore subject to federal securities laws.”
TD Cowen sees the spot Bitcoin ETF approval as consistent with Gensler's thesis that the agency is taking a slow approach modeled on how it establishes rules for the ABS (asset-backed securities) market. The bank believes Congress will need to enact legislation to create the framework for how tokens will be regulated, what type of disclosures will be required, and which agency will be responsible for investor protections.
Gensler's term ends in June 2026, and he could maintain a Democratic majority in the SEC until then. TD Cowen concludes that this buys the US time to learn from other countries before enacting a regulatory regime that will be difficult to change once adopted.
*This is not investment advice.