Odds of Spot Ethereum ETF Approval Rise to 75% as Cryptocurrency Becomes Political Chip in Election Year
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Odds of Spot Ethereum ETF Approval Rise to 75% as Cryptocurrency Becomes Political Chip in Election Year
We may not see the light of victory in May, but perhaps we can in August.
Navigating Web3 tides with focused insightsBy TechFlow
How many people were woken up by ETH's surge?
Eric Balchunas, ETF analyst at Bloomberg, unexpectedly raised the odds of spot ETH ETF approval from 25% to 75%. He said he heard rumors this afternoon that the SEC might make a complete 180-degree turn on this issue (which is becoming increasingly politicized), so everyone is now scrambling to prepare.
Subsequently, Coindesk reported that three sources indicated the U.S. Securities and Exchange Commission (SEC) has asked exchanges to expedite updates to their 19b-4 filings, suggesting it may approve these applications before the key deadline (May 23/24).
Of course, this does not mean the ETFs will be approved—issuers still need S-1 applications approved before products can begin trading.
The 19b-4 filing refers to an application submitted under Section 19(b) and Section 4 of the Securities Exchange Act. Such applications are typically filed by stock exchanges or other self-regulatory organizations (SROs) with the U.S. Securities and Exchange Commission (SEC) to seek approval for changes to their rules. These changes may involve exchange operating rules, listing standards, fee structures, etc. The SEC reviews these applications to ensure they meet requirements for fairness and efficiency in securities markets.
The 19b-4 filing is the frontline battle for approval of a spot Ethereum ETF.
Why did the SEC suddenly make a 180-degree turn?
Perhaps, as analyst Eric Balchunas said, politics have become the main factor.
Last Wednesday, Coinbase stated in a research report that Ethereum (ETH) has the potential for an upside surprise. The market may have underestimated the timing and likelihood of approval for a U.S. spot Ethereum ETF.
HAN, the author of the report, said that if the SEC rejects spot ETH ETFs, it would burn political capital—an unwise strategy in an election year.
Currently, SEC Chair Gensler and two other voting commissioners are Democrats, while the other two voting commissioners are Republicans; the SEC leadership remains predominantly Democratic.
Previously, Trump extended an olive branch to cryptocurrency, loudly declaring his support—“vote for Trump if you support crypto.” If Biden’s Democratic administration maintains a consistently hardline anti-crypto stance, it could hurt its electoral prospects.
Another major development worth noting is the repeal of SAB 121.
On May 17, the Senate passed H.J.Res 109, overturning the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). Notably, the bill passed 60 to 38, indicating broad bipartisan support.
SAB 121 was issued in 2022. It required digital asset custodians to treat digital assets as liabilities and hold them at fair value on their balance sheets. For example, if a bank holds $1 billion in Bitcoin for clients, it must also hold $1 billion in cash to offset this “liability” on its balance sheet.
This discouraged financial firms from offering custody services for Bitcoin and other cryptocurrencies.
However, a previous statement from the White House emphasized that if the bill (H.J.Res 109) reaches President Biden’s desk, he will veto it. Biden can choose to sign, veto, or take no action. If he takes no action, the bill becomes law without his signature.
If Biden ultimately chooses to sign the bill or takes no action, it could signal a true shift in the Democratic Biden administration’s stance toward cryptocurrency.
The SEC faces deadlines of May 23 and May 24 to make decisions on VanEck’s and ARK’s Ethereum ETF applications, respectively.
Another key date to watch is August—August 3 is Fidelity’s Ethereum ETF deadline, and August 7 is BlackRock’s Ethereum ETF deadline.
Victory may not be visible in May, but perhaps it will come in August.
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