Speculation Mounts: SEC’s Ethereum Foundation Probe Might Be Causing Delay in Spot Ether ETF Approvals

Industry experts speculate that the reported investigation into the Ethereum Foundation might be part of a coordinated effort to undermine Ether (ETH), potentially influencing the reluctance of the U.S. Securities and Exchange Commission (SEC) to approve or delay spot Ether exchange-traded funds (ETFs).

Fortune revealed on March 20 that the SEC had issued subpoenas to companies associated with the Ethereum Foundation, fueling rumors of a campaign to classify ETH as a security, dating back to 2022.

Reacting to the news, Coinbase’s chief legal officer, Paul Grewal, argued against the denial of ETH ETF applications, citing SEC Chair Gary Gensler’s previous testimony that Ether is not a security. Travis Kling, chief investment officer of Ikigai Asset Management, described the situation as a “coordinated attack” on ETH, expressing uncertainty about its implications.

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Fox Business reporter Eleanor Terrett suggested that the subpoenas might explain the SEC’s apparent hesitance to engage with potential spot Ether ETF issuers.

This lack of engagement has led Bloomberg ETF analysts Eric Balchunas and James Seyffart to lower their odds of a spot Ether ETF approval from 70% to 25% by May.

While Patrick McHenry, chair of the House Financial Services Committee, and others criticized the reported move, Brian Quintenz, a former CFTC commissioner, highlighted the SEC’s previous acknowledgment of Ether’s non-security status when approving Ether futures ETFs.

However, Cardano founder Charles Hoskinson suggested that Ethereum’s transition to a proof-of-stake mechanism might have prompted a reassessment of Ether’s security status by the SEC.

Quintenz countered this argument, stating that the SEC had already considered the Ethereum Merge in its approval of Ether futures ETFs.

Quintenz further explained that if Ether were deemed a security, CFTC-listed Ether futures ETFs would be unlawful, as derivatives of Ether would be subject to different regulations.

The SEC’s delay in deciding on spot Ether ETF applications has led to speculation about potential excuses for the delay or denial, especially considering the SEC’s prior acknowledgment of Ether’s status. Currently, the SEC has deferred its decision on spot Ether ETFs to May or later.

Several applicants, including BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Hashdex, and Franklin Templeton, are awaiting SEC approval.

Balchunas and Seyffart anticipate denial of spot Ether ETFs but expect eventual approval before 2025.