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Ethereum Exchange Traded Funds Seem Out of Reach...Report Raises Concerns!

A recent SEC filing has raised concerns about the future of Ethereum exchange-traded funds. Which could shake the foundations of the crypto industry.

On May 13, Scott Johnson of Davis Polk & Wardwell highlighted the SEC's call for public input on the classification of BlackRock's proposed Ethereum exchange-traded fund as a commodities-based trust.

SEC Examination of Ethereum Exchange Traded Funds

Johnson suggested that rejecting ETH ETFs could be a strategic move. They may be misrepresented as commodity-linked credit stocks.

He explained Johnson: "The obvious goal is the possibility of rejection on the grounds that these spot deposits are misrepresented as commodity-based credit shares and are not eligible if they hold a security."

On the other hand, BlackRock's recent filing indicated a possible move of... SECOND To classify ETH as collateral. Such classification could prevent the approval of spot Ethereum ETFs.

Bloomberg ETF analyst Eric Balchunas also noted that although it is full of legalese, the filing indicates a low chance that the SEC will approve the Ethereum spot ETF. Balchunas also pointed out, focusing on the issue of classification:

underlines That “the probability is still very low, if not zero”.

Anticipation and concerns regarding ETF approvals

The SEC's decision on the VanEck Spot Ether ETF, expected by May 23, is crucial. This will likely affect other companies such as ARK 21Shares and Hashdex. Grayscale's recent withdrawal of its ETF application has also added to market uncertainty. VanEck CEO Jan Van Eck expressed concerns about regulatory challenges.

Amid these events, SEC Chairman Gary Gensler's previous comments that ETH is not a security are under review. The committee is closely examining the altcoin situation. Gensler's upcoming speech at the Investment Company Institute Summit in Washington, D.C., may also provide further clarity.

Johnson highlighted the SEC's obligation under 15 USC 78s (b)(2)(B) to explain any potential denial. Repeated issues in filings involving Ethereum ETFs not being properly classified as commodities indicate a change in regulatory focus.

Reactions vary within the industry. Standard Chartered Bank expressed pessimism about approving the instrument, calling for more dialogue between the Securities and Exchange Commission and European ETF applicants. On the contrary, the J.P. Morgan Optimistic but still cautious about potential legal issues similar to those faced by Grayscale.

Read more: Everything you need to know about Ethereum funds and altcoin season


The April report also revealed the SEC's investigation into the Ethereum Foundation. The focus is on whether ETH should be considered a security. This investigation could have a significant impact on the SEC's final decision regarding Ethereum ETFs.

As the VanEck deadline approaches, the crypto community is on edge. The SEC's decision is eagerly awaited. This decision will not only affect the future of spot Ether ETFs. This will also set a precedent for the regulatory framework of the cryptocurrency market. This highlights the significant risks and potential for major changes.

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