SEC Hints It May Approve Ethereum ETFs at Last Minute, But ‘No Issuers Are Ready’

It sounded like an almost certain rejection from the Securities and Exchange Commissionbut just hours before the May 23 deadline to rule on VanEck’s application to launch an Ethereum spot exchange traded fundIt appears that the SEC may reconsider its decision.

CoinDesk First reported On Monday, the nine potential issuers that had filed to list and trade the ETFs were “abruptly” asked by regulators to update their 19b-4 filings on an expedited basis. A 19b-4 is what an exchange like the NYSE requires for new product introductions — in other words, the applicants and the exchange ask the SEC for permission to add the ETFs to their platforms.

Since rumors began circulating Monday afternoon, the price of Ether has climbed nearly 20%, trading near $3,750 as of 1:30 p.m. ET Tuesday.

Since VanEck is the first exchange to file, its approval could hypothetically be a green light for others waiting to hear about their own 19b-4s. While rumors began circulating Monday that applications were being worked on, Bloomberg analysts updated their ratings from 25% to 75% approval.

But the news left issuers scratching their heads. Every issuer Bloomberg ETF analyst James Seyffart spoke to was “caught off guard by the SEC’s 180-degree turn,” he told Fortune. The agency reached out to filers for comment and updates just three days before the deadline, he said.

“This is not standard operating procedure, and everyone from issuers to exchanges to lawyers to market makers and more are scrambling to be ready for eventual approval and to meet SEC requirements,” Seyffart adds. The hasty nature of the pivot suggests it was likely a “political move,” the result of a “top-down decision” by the Biden administration, he speculates. “No issuer is ready,” he wrote on X.

So far, Grayscale is the only potential issuer to post an update 19b-4 to the New York Stock Exchange website, for its application to transfer its Ethereum Mini Trust ETF. Meanwhile, Fidelity has abandoned its plan to put Ether in its ETF, according to a S-1 Update The filing was made with the SEC early Tuesday. In previous filings, the company had said it intended to “stake a portion of the trust assets” to “one or more” infrastructure providers, but now it “will not stake Ether” stored with the custodian.

Staking involves committing Ether to secure the network in exchange for a yield, which is currently around 3%, according to data from staking service Lido. Ark and Franklin Templeton have also considered staking in their applications. In today’s 19b-4 update from Grayscale, the company confirmed that it would not participate in staking. The fact that Grayscale highlighted this and Fidelity omitted it suggests that the SEC may have asked that staking be banned. Vance Spencer, co-founder of Business executivestold Fortune he believed the SEC’s last-minute requests included advice on staking.

Staking the underlying Ether in the ETF has been seen as a reason the SEC could reject the applications, with Chairman Gary Gensler expressing concern in March that digital assets using staking protocols could be considered securities under federal law. Staking could be “a significant complication,” Bitwise CIO Matt Hougan said. previously said Fortune.

However, even if the SEC approves VanEck’s 19b-4 on Thursday, it doesn’t guarantee clearance, as exchanges will need S-1 filings from issuers before the products can begin trading. When filing to launch a new security, an S-1 is the form that describes to potential investors and the SEC the structure of the asset, how it will be managed and, in this case, how it plans to mirror the performance of the underlying asset, namely Ether tokens.

But S-1 projects could take “weeks, if not months” to be approved, Seyffart said. written on X“That said, if we are correct and see these theoretical approvals later this week, that should mean that S-1 approvals are a matter of ‘when’ and not ‘if.’”

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