SEC Stance on Spot Ether ETFs Uncertain, Grayscale and Galaxy Digital Offer Contrasting Views

Despite claims of low engagement from the SEC regarding spot ether ETF applications, Grayscale's Chief Legal Officer suggests that previous discussions during spot bitcoin ETF approvals have already addressed key details relevant to both assets. However, Galaxy Digital believes a spot ether ETF approval this May is unlikely due to SEC inquiries into Ethereum Foundation relationships, and the SEC recently delayed its decision deadline for Grayscale's ether futures ETF.

SEC's Engagement on Spot Ether ETFs Remains Unclear, Grayscale and Galaxy Digital Offer Contrasting Views

Washington, D.C. - The Securities and Exchange Commission (SEC) has yet to provide a clear indication of its position on applications for spot ether exchange-traded funds (ETFs), leaving market participants in a state of uncertainty. However, Grayscale's Chief Legal Officer, Craig Salm, believes that the highly anticipated products "should be approved."

In a series of posts on social media platform X, Salm outlined his rationale for optimism. He dismissed the notion that a perceived "lack of SEC engagement" necessarily signals a negative outcome for spot ether ETFs. He argued that many of the key details relevant to these products were already thoroughly discussed and resolved during the approval process for spot bitcoin ETFs.

"In the final months leading up to Bitcoin ETF approval, Grayscale and others received positive and constructive engagement from the SEC," Salm wrote. "We had thoughtful conversations and discussed the finer details of creation/redemption procedures, cash v. in-kind, APs, LPs, custody, etc."

Salm contended that these same issues are largely identical for spot bitcoin and spot ether ETFs. "The only difference is rather than the ETF holding bitcoin, it holds ether," he said. "So in many ways, the SEC already has engaged and issuers simply have less to engage on this time."

However, Alex Thorn, head of firmwide research at Galaxy Digital, expressed a contrasting view. He stated that based on reports that the SEC issued subpoenas to crypto firms regarding their relationship with the Ethereum Foundation, a spot ether ETF approval in May seems "extremely unlikely." The SEC's actions have been interpreted by some as an indication that the agency may be considering classifying ether as a security.

Salm's comments come shortly after the SEC filed a document delaying its decision on Grayscale's ether futures ETF until May 30. The delay applies only to the ether futures ETF, not a spot ether ETF.

The SEC has faced criticism from some cryptocurrency advocates for its perceived slow and cautious approach to approving crypto-related products. However, the agency has consistently emphasized its commitment to ensuring investor protection and market integrity. It remains to be seen how the SEC will ultimately approach the question of spot ether ETFs.