Quick Take:

• Ethereum spot ETFs likely to face rejection on May 23.
• Lawsuits against SEC unlikely due to high costs and risks.
• US election could determine regulatory stance towards crypto.

The fate of Ethereum spot exchange-traded funds (ETFs) hinges on the outcome of the upcoming US presidential election, with analysts predicting a denial of applications on May 23. Despite the success of suing the Securities and Exchange Commission (SEC) for Bitcoin ETFs, prospective issuers are hesitant to take legal action due to regulatory uncertainties and potential costs. Instead, they might await a change in SEC leadership post-election, hoping for a friendlier stance towards crypto. Here’s a deeper look into how the election could shape the trajectory of Ethereum ETF approvals.

The Securities and Exchange Commission is poised to reject applications for Ethereum spot ETFs on May 23, citing a lack of meaningful interaction with issuers and Ethereum’s uncertain regulatory status. Analysts believe that these ETFs might not materialize until the end of 2025, considering the prevailing regulatory environment.

In the face of a potential rejection, ETF issuers such as BlackRock, Fidelity, or Ark Invest have limited options: either litigate against the SEC or reapply at a later date. However, following Grayscale’s costly legal battle over Bitcoin ETFs, other firms are wary of pursuing a similar strategy due to its financial and reputational risks.

The upcoming US presidential election adds another layer of complexity to the situation. A victory for former President Donald Trump could lead to a change in SEC leadership, potentially impacting the regulatory stance towards crypto assets. While Trump might not be overtly pro-crypto, a new SEC chair appointed during his tenure could signal a more favorable approach towards spot ETFs.

Considering these factors, the Ethereum ETF approval timeline could extend well beyond the immediate future. Alternatively, issuers might expedite filings post-election to capitalize on potential regulatory shifts. As the crypto community awaits developments, the outcome of the US election looms large over the fate of Ethereum ETFs.

Election time

And why sue the SEC when the US presidential election, slated this November, may solve the problem?

With Trump leading in some polls, the odds that a new SEC chair will be appointed are higher than previously expected.

“Trump is not necessarily pro-crypto,” Balchunas said. “Remember his previous SEC chief Jay Clayton didn’t allow that ETF either. So he’s not going to be like, ‘let’s just go crazy.’ But he’ll probably still be better for crypto and spot ETFs.”

Assuming a new chair is appointed in April or May, and filings submitted immediately afterwards, that could bring the deadline for approval or rejection to somewhere around December 2025.

Alternatively, issuers could try to file as soon as the election is over — or even before results are in — to speed up the timeline.