SEC’s Regulatory Conundrum Unfolds Over Ether Spot ETFs

ETF, SEC signboard and Ethereum logo

Nate Geraci, President of ETF Store, raised critical questions regarding the SEC’s stance on approving Ether (ETH) futures exchange-traded funds (ETFs) while potentially hesitating on spot ETFs. Geraci’s inquiries stem from the approval of ETH futures ETFs in October and the perceived inconsistency in protecting investors. Expressing concerns over SEC’s reluctance to greenlight spot ETFs despite the approval of futures-based counterparts, Geraci underscored the need for regulatory clarity.

Spot ETH vs Futures ETH ETFs

In a recent social media exchange, Nate Geraci, President of ETF Store, raised critical questions regarding the SEC’s stance on approving Ether (ETH) futures exchange-traded funds (ETFs) while potentially hesitating on spot ETFs. Geraci’s inquiries stem from the approval of ETH futures ETFs in October and the perceived inconsistency in protecting investors. Expressing concerns over SEC’s reluctance to greenlight spot ETFs despite the approval of futures-based counterparts, Geraci underscored the need for regulatory clarity.

ETH’s Acceptance As a Commodity

In an X post, Geraci wrote,

“If ether futures aren’t *highly* correlated w/ spot market, then why did SEC approve ether futures ETFs in Oct… How does that protect investors? Not saying SEC gonna approve spot ether ETFs, but not sure how they deny based on lack of correlation. Would be pretty bad look IMO.”

Highlighting the lack of precedent compelling the SEC to approve spot ETH ETFs, Geraci emphasized the Grayscale victory as a potential precedent setter. He argued that the SEC faces the dilemma of either upending years of implicit acceptance of ETH as a commodity or risking new lawsuits if issuers challenge their decisions. Geraci stressed the logical parity between approving futures and spot ETFs, questioning the SEC’s rationale behind the apparent discrepancy in treatment.

Political Influence on SEC’s Spot ETH ETF

In response to Geraci’s thread, Eric Balchunas, Senior ETF Analyst at Bloomberg, echoed the sentiment but suggested that political considerations might influence SEC’s decision-making. Balchunas hinted at potential political tensions and the reluctance to invite further scrutiny by approving spot ETH ETFs, especially given Gary Gensler’s stance on Bitcoin (BTC).

“Logic is sound but it feels less politically tenable this time. Gary is in the Warren doghouse for btc. It may be that simple. And threat of lawsuit lower IMO bc Grayscale may be less excited to subsidize another blockbuster hit product for BlackRock” Balchunas said.


The Complexity of Spot ETH ETF

However, Geraci countered, highlighting Grayscale’s success in navigating legal battles and the potential for political shifts to impact regulatory decisions.

The exchange underscores the complex regulatory landscape surrounding cryptocurrency ETFs, with stakeholders grappling with legal, political, and market dynamics. As the debate intensifies, the crypto community awaits further developments, hoping for greater clarity and consistency in regulatory oversight.

Author: Candace

Candace loves the arts. She holds some bitcoins.