The US Securities and Exchange Commission (SEC) appears set to reject applications for spot ether exchange-traded funds (ETF), with recent in-house meetings painting a bleak future for the proposed offering.

According to a Reuters report, the SEC will most likely withhold its approval for spot ETFs linked to the second-largest cryptocurrency. The regulator is set to decide on a raft of applications. The securities watchdog is expected to give its decision on applications issued by VanEck and Ark at the tail end of May.

Per the report, four unnamed SEC officials disclosed that preliminary discussions between the regulator and issuers have not broached “substantive details” over the internal workings of the ETFs. Described as “one-sided” the conversations are yet to cover the finer details of the proposal with issuers arguing that the market is ripe for a spot ETF.

The issuers hinge their arguments on the relative success of ether futures-based ETFs approved in 2023 but sources say the SEC failed to ask any probing questions or reel out specific concerns.

The SEC’s laid-back approach contrasts with its active stance in the months leading up to the approval of spot bitcoin ETFs. Since the approval of ETFs for bitcoin in January, market participants have touted Ethereum as next in line, but sceptics are planting their heels for a long, drawn-out battle with Gensler’s SEC.

“It seems more likely that approval will be delayed until later in 2024 or longer,” remarked Todd Rosenbluth, an executive at analytics firm Vettafi. “The regulatory picture still seems cloudy.”

Since the start of April, enthusiasm among issuers has waned, with VanEck CEO Jan van Eck predicting that his firm’s application may be “rejected” by the SEC. On the flip side, other issuers remain optimistic about forcing the hand of the Commission via fresh paperwork designed to address any lingering concerns.

Outside of VanEck and Ark, the SEC still has to entertain applications from seven other issuers, including 21Shares, Fidelity, BlackRock, and Grayscale.

Potential reason for a denial

In the event of a denial, the SEC could argue that it has insufficient time to gauge market surveillance mechanisms before rolling out spot ETFs for ether. Experts say the regulator may be keen on demanding more time to glean more information on statistical data for the products.

“I think that would be the mechanical reason why it would get pushed out is they just want to see more data,” said Matt Hougan, Chief Investment Officer at Bitwise Asset Management.

However, there are fears that an issuer could drag the SEC to court like Grayscale in the build-up to bitcoin spot ETFs.

This full article can be read on ZY Crypto here: https://zycrypto.com/goodbye-ethereum-spot-etfs-us-sec-angling-to-reject-offering-with-approvals-touted-for-2025/