Ethereum ETF Prospects Dim as SEC Considers Classifying ETH as a ‘Security’

Key Points

• The US SEC may reject spot ETH ETF applications due to Ethereum’s ‘security’ status.
• Despite the potential rejection, some analysts believe the SEC lacks solid grounds for disapproval.

The US Securities and Exchange Commission (SEC) has been silent regarding the status of Ethereum (ETH) and whether it will approve the spot ETH ETF filings.

Recent information suggests that the SEC might refuse the ETF applications and raise issues regarding ETH’s security status.

Analysts React to Possible Rejection

In response to a recent SEC notice on spot ETF filings, Bloomberg ETF analyst James Seyffart stated that the likelihood of the SEC refusing Ethereum ETFs has increased. He reasoned that this could be due to the SEC considering Ethereum as a security.

The market has been expecting a rejection of ETH ETF applications in May. This new development could provide insight into the possible reasons behind the SEC’s decision.

However, Nate Geraci of ETF Store disagreed with the SEC’s potential grounds for rejecting the spot ETF applications. He cited the recent removal of staking features and existing ETH futures as reasons why the SEC should not reject the applications.

Market Reactions and Predictions

Last week, ARK and 21 Shares removed the staking features from their spot ETH ETF application. This move was interpreted by some as a possible sign of approval by the SEC.

Following this, the chance of May ETH ETF approval on the prediction market, Polymarket, increased from 9% to 16%.

However, following the revelation of the SEC’s potential ETF rejection and the raising of ETH’s ‘security’ status, the approval chance dropped to 13% on Polymarket.

The applications by Ark Invest and 21 Shares for ETH ETF are due for the SEC’s decision next week, with the decision on the Hashdex application due at the end of May.

Negative views on the SEC’s spot ETF approval have negatively impacted ETH’s price. ETH has been experiencing a price downtrend since mid-March, a bearish market structure that could push ETH to $2500 or lower.