Ethereum ETF Approval Odds On Edge As SEC Unveils Major Notice

The U.S. Securities and Exchange Commission (SEC) has unveiled a official notice regarding the approval of Ethereum Exchange-Traded Funds (ETFs). The notice, brought to light by finance lawyer Scott Johnson, highlights the critical scrutiny facing the proposed ETF. Moreover, it highlights potential hurdles in its path to approval.

SEC To Debate On ETH Classification Before Spot Ethereum ETF Decision

Johnson, a prominent figure in the crypto space, took to social media platform X to reveal the contents of the official notice. He stated, “I’m aware this is widely considered a possibility, but this is your official notice that the SEC is considering the security question for ETH in this upcoming spot ETF order.”

The crux of the matter revolves around whether the proposed Ethereum ETF aligns with regulatory standards. This particularly considers the investment product’s classification under Nasdaq Rule 5711(d) as Commodity-Based Trust Shares. Furthermore, Johnson emphasized the SEC’s obligation under 15 U.S.C. 78s(b)(2)(B) to provide notice of the grounds for disapproval under consideration, citing concerns over the Trust’s underlying assets and their classification.

The official notice, as cited by Johnson, states: “Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act.”

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Potential Implications On Ether ETF Decision

Specifically, the SEC is probing whether the Ethereum Trusts have properly filed its proposal to list and trade the shares, considering the nature of the underlying assets and their compliance with regulatory standards. Johnson’s revelation sheds light on the potential roadblocks facing the Ethereum ETF approval process.

In a X thread, he remarked, “The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security.” Moreover, he highlighted the SEC’s conflicting stance on the Spot Bitcoin ETF approval and the Ethereum ETF decision.

Johnson underscored that the SEC never questioned the classification of the Bitcoin Spot/Futures ETFs while it’s the total opposite in case of ETH ETFs. However, the Commodity Futures Trading Commission (CFTC) and Consensys’ actions against the SEC are also responsible for raising these questions.

The CFTC has always considered ETH to be a commodity while the SEC was mulling on whether to declare it a security upon Prometheum’s request. Meanwhile, Ethereum developer Consensys issued a lawsuit against the SEC last month. The firm urged the agency to not label ETH as a security.

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