Roughly ‘60% chance’ of spot ETH ETF approval in May: Seyffart

Spot ether ETFs have roughly a 60% chance of being approved in May, according to Bloomberg Intelligence analyst James Seyffart.

Earlier this week, the Securities and Exchange Commission delayed decisions on the potential BlackRock and Grayscale ether ETFs. Alongside BlackRock and Grayscale, Ark 21Shares and VanEck are also in the running for a spot ether ETF.

The delays were not surprising, according to experts who expect the SEC to put off a decision on the ETFs until later this year. The SEC, earlier this month, approved a slew of bitcoin ETFs.

Seyffart is eyeing May 23 as the next date to watch in the spot ether saga. May 23 marks the 240-day window for the SEC to decide on proposals from Ark/21Shares and VanEck.

“My base case is still probably around 60-ish percent that they’ll approve them” around that date, he told Blockworks. “But there’s plenty of ways they can delay.”

“So if the SEC wants to get geared up and ready to go and wants everyone to go at the same time, they’ll likely do it on May 23 unless they can figure out some way to deny or delay this whole process and do what they want,” he continued.

If a May approval doesn’t pan out, then Seyffart plans to watch 2025.

Grayscale is taking a similar approach to its bitcoin ETF by trying to convert the Grayscale Ethereum Trust (ETHE) into an ETF.

The company’s Chief Legal Officer Craig Salm said in a radio interview that the firm is looking at summer 2024 for an SEC decision.

“That clock will come due sometime this summer,” he said.

Its application for a bitcoin ETF was initially denied which led the firm to file an appeal. Back in August, a panel of judges sided with Grayscale, leaving the SEC to reconsider the application.

“This ruling opened the floodgates for BTC, so to speak. And also put the SEC in a logical pretzel,” Van Buren Capital general partner Scott Johnsson said.

Fast forward to January, and Grayscale was one of nearly a dozen firms approved to launch. It is also the fund with the highest number of outflows since the ETFs went live earlier this month.

Johnsson further gave his insights on the possible ETH ETF roadmap in a post on X Thursday.

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He noted that there’s a lot of “nuance right now,” but he expects that, in the long term, “ETH spot is almost guaranteed.”

However, the SEC can choose to ask potential issuers to pull their applications or issue denials when the May deadlines come around. If the SEC were to ask Ark/21Shares or VanEck to withdraw then it’s a “good indication that the SEC is going to approve these,” Seyffart said.

“The SEC might just need more time to get up to speed with Ethereum versus Bitcoin,” he added, noting how different the two are.

Caution, Johnsson said, “is warranted in assuming spot ETF approval.”

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Johnsson believes that the existence of ether futures ETFs is a bright spot for the potential green light, having seen that the SEC approved the bitcoin ETFs partially on that basis.

Seyffart added that the SEC could say that the futures market isn’t “large enough or liquid enough or impactful enough” when looking at spot ether ETFs.

But, as May approaches, there should be clues that “inform” the public as to what the SEC is thinking.

“There’s a few different things that we can look to to get a feel for what’s going on that we don’t have yet, and I wouldn’t expect us to have it for some time. Perhaps another month or two,” Seyffart said. These things include filings and responses from both the issuers and the SEC.

“It would certainly not surprise me if the SEC decided to avoid the [DC Circuit] at all costs and simply issued approval,” Johnsson said in a post on X.

SEC Commissioner Hester Peirce, in an interview earlier this week, said that the SEC “shouldn’t need a court to tell us that our approach is arbitrary and capricious in order for us to get it right.”

She added that the SEC will “apply precedent” to spot ether decisions.

Currently, Seyffart told Blockworks, the process for spot ETH approval reminds him of July of last year. Around that time, BlackRock and other issuers were about a month into the spot bitcoin ETF race and the Grayscale decision had yet to be issued.

“I know the timeline isn’t exactly lining up that way, but what we know and what we don’t know are kind of in the same boat,” he said.

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