The SEC Avoids Favoritism
According to Seyffart, the SEC does not want to show bias towards certain companies in regards to ETF approvals. He states that the SEC aims to ensure fair competition and prevent one firm from gaining an advantage. Rumors from insiders and individuals familiar with the process have corroborated this view. Seyffart acknowledges that it requires delving into intricate details, such as examining calendars and deadlines, to make sense of the situation.
Grayscale’s Influence on ETF Approvals
Seyffart highlights the impact of Grayscale Investments’ successful legal battle against the SEC in August regarding its application for a spot bitcoin ETF. As a result of this case, the SEC’s rejection rationale and the requirement for a surveillance-sharing agreement, like those with Coinbase, have been invalidated. While unprecedented, Seyffart believes that the SEC will approve spot bitcoin ETFs due to these developments. However, he notes that there is a possibility of the SEC delaying the process or even asserting that ether is a security.
Spot Ether ETFs May Take Longer
Seyffart acknowledges that the approval of a spot ether ETF presents differences compared to a spot bitcoin ETF. He recognizes arguments made by the SEC, led by Gary Gensler, that the futures market for ether is less established and that Ethereum employs a proof-of-stake model instead of Bitcoin’s proof-of-work model. Seyffart personally disagrees with these points but believes that the SEC implicitly accepts ether as a commodity. Consequently, Seyffart predicts that spot ether ETFs will likely be approved by the end of May, with final deadlines for Ark and 21Shares and VanEck spot ether ETFs applications.
Timeline for Approval and Launch
Once approved, the ETFs must wait for the Corporate Finance division of the SEC to approve the S-1 prospectuses before they can start trading. Seyffart suggests that the SEC may provide 19b-4 approvals while still working on the S-1s, potentially causing a delay in listings. Further, he anticipates a cautious approach from major brokerages and banks, resulting in a slow uptake of the ETFs. Seyffart expects independent IRAs or independent advisors to be the initial buyers, with some transferring exposure from existing options like the Grayscale Trust or international crypto ETFs. However, he believes that billions of dollars will eventually flow into these products given the interest from major asset owners worldwide.