No More Than 50% Chance of Spot Ether ETF Approval By May, JPMorgan Says

Lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains, including Ethereum, make approval of a spot ether ETF more challenging until these cases are resolved, the investment bank said.

AccessTimeIconJan 19, 2024 at 10:37 a.m. UTC
Updated Mar 8, 2024 at 8:13 p.m. UTC

There has been some optimism in the market about the approval of a spot ether (ETH) exchange-traded fund (ETF) by May 23 this year, which is the Securities and Exchange Commission’s (SEC) deadline for the Ark 21Shares application. Per JPMorgan (JPM), the probability of the SEC approving the ETF by May is no more than 50%.

Since the BTC ETF narrative gripped the market last year, traders have been looking at ether as the next likely candidate to get a spot ETF approval in the U.S. Reflecting this sentiment is the discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE), which has been contracting since the summer, and has lingered around 12% over the last two months, according to JPMorgan.

Per the investment bank, some have argued that the SEC's decision not to mention ETH in its lawsuit against crypto exchanges for violating securities law means the regulator will likely classify the cryptocurrency as a commodity in the coming months, a necessary condition for spot ETF approval. Others have contended that the approval of ether futures-based ETFs in September last year “by itself implies that ether is deemed to be a commodity.”

JPMorgan's analysts led by Nikolaos Panigirtzoglou are skeptical. “While we are sympathetic to the above arguments we are skeptical that the SEC will classify ether as a commodity as soon as May,” analysts led by Nikolaos Panigirtzoglou said in a note to clients on Jan. 18, adding that the chances of approval of a spot ether ETF by May this year is “not higher than 50%.”

ETH has surged in recent weeks following the approval of a spot bitcoin ETF as traders have bet on the likelihood of the approval of an ether exchange-traded fund. If approved, it would be the first time professional investors in the U.S. can gain exposure to the blockchain’s token without having to own it.

Following Ethereum’s transition from the proof-of-work to proof-of-stake consensus mechanism in 2022 and the negative impact this shift has had on the blockchain’s decentralization, ether now looks more similar to other altcoins outside of bitcoin (BTC) which have been classified as securities by the SEC, the report said.

“The ongoing lawsuits by the SEC against crypto exchanges offering staking services for proof-of-stake blockchains including Ethereum, make a spot ether ETF approval more challenging at least until these lawsuits are resolved,” the report added.

Edited by Omkar Godbole.


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Will Canny is CoinDesk's finance reporter.