50% or Lower Odds of SEC Approving Spot Ethereum ETF by May: JPMorgan
The prospects of the Securities and Exchange Commission (SEC) approving a spot Ethereum (ETH) ETF by May 23rd stand at no higher than 50%, according to analysts at investment bank JPMorgan.
In a research note on January 18, a team led by managing director Nikolaos Panigirtzoglou expressed that some investors expect the SEC to classify ETH as a commodity for a crypto ETF. However, they noted that significant legal ambiguity could potentially impede this determination by the May deadline.
Key Takeaways:
- JPMorgan puts the odds of a spot ETH ETF approval by May 23 at 50% or less.
- The SEC classification of ETH as a commodity faces legal uncertainty.
- The shift of the Ethereum network to proof-of-stake consensus complicates regulatory treatment.
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Will Ethereum follow Bitcoin’s path to spot ETF approval?
The analysis comes amid building market optimism through early 2024 that Ethereum could follow Bitcoin’s path to spot ETF approval after futures-based ether funds launched in late 2022.
However, JPMorgan contends ETH now resembles other altcoins outside of Bitcoin in the eyes of regulators after Ethereum completed its migration away from proof-of-work mining to a proof-of-stake validation model last September.
Unlike Bitcoin, whose energy-intensive mining process locks in its classification as a digital commodity, proof-of-stake networks like Ethereum are more challenging, the report states. Namely, ongoing lawsuits filed by the SEC against crypto exchanges for enabling staking services on proof-of-stake chains suggest legal clarity remains elusive.
Read more: Chinese Crypto Users Turn To In-Person Trades To Evade Crackdown
Analysts say the resolution of those court cases seems necessary to pave the way for a spot ETH ETF. For these reasons, JPMorgan considers a spot Ethereum fund approval in the near term unlikely.
Still, the report acknowledges that the discount to net asset value for the Grayscale Ethereum Trust has tightened in recent months as anticipation mounted for potential regulatory greenlights ahead.
