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This Is Why The SEC Might Not Approve an Ethereum ETF This Year

2 mins
Updated by Bary Rahma
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In Brief

  • Jake Chervinsky, a prominent crypto attorney, argues that pending applications for Ethereum ETFs might face rejection from the SEC.
  • He suggests that the approval of a spot Ethereum ETF could further amplify the market "animal spirit" resulting from other approvals.
  • Despite BlackRock's interest in an Ethereum ETF, Chervinsky warns that the SEC pressure will prompt issuers to withdraw applications.
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Bitcoin exchange-traded funds (ETFs) have enjoyed significant success, igniting hopes for similar offerings for other cryptocurrencies like Ethereum.

However, crypto attorney Jake Chervinsky holds a contrary view. He suggested that pending applications for an Ethereum ETF might face rejection from the US Securities and Exchange Commission (SEC).

Why The SEC Will Deny Ethereum ETFs

Chervinsky said approval of a spot Ethereum ETF would intensify political pressure on the financial regulator. He pointed out that the SEC faced “a ton of political blowback for approving Bitcoin ETFs” despite its decision being influenced by the court.

The lawyer highlighted the SEC’s precedent of adopting legally dubious stances to align with political agendas, suggesting the federal agency might lean on similar reasoning for denial.

“The SEC has a legal argument that, even if wrong, likely passes the laugh test by enough to justify denial if it wants. And we know the SEC is willing to take wrong legal positions in court to satisfy political priorities,” Chervinsky explained.

Ethereum ETF applications deadlines
Ethereum ETF Applications. Source: Bread and Butter 247

Moreover, Chervinsky noted that the Bitcoin ETF approval has heightened market sentiment, coined as “animal spirits,” where prices react to human emotions rather than inherent value. With Bitcoin soaring past $60,000 post-approval, largely due to ETF inflows, an Ethereum ETF would amplify this trend.

Read more: How To Trade a Bitcoin ETF: A Step-by-Step Approach

Consequently, he predicted that the SEC would reject Ethereum ETF applications to retain market oversight. Chervinsky’s arguments align with a recent report stating that the SEC remains uncomfortable with cryptocurrencies. Besides, industry sources expect the Commission to move cautiously because of ETH’s ambiguous legal status.

BlackRock’s Interest Might Not Matter

While many view BlackRock’s interest in an Ethereum ETF positively, Chervinsky cautioned against assuming that the asset management firm’s interest guarantees approval from regulators. He suggested that the SEC might prompt BlackRock and other ETH ETF issuers to withdraw their applications for various reasons.

“Yes, Blackrock is on the other side of this one. But Blackrock’s nearly perfect record in getting ETFs approved has as much to do with a collaborative relationship with SEC as it does the ability to put on pressure. If the SEC asks Blackrock and the other ETH ETF sponsors to withdraw (a common practice), I bet they will,” Chervinsky asserted.

Read more: Ethereum (ETH) Price Prediction 2024 / 2025 / 2030

BlackRock AUM
BlackRock’s Assets Under Management. Source: Statista

BlackRock, the world’s largest asset management firm, manages over $9 trillion in assets. Known for its successful ETF applications, BlackRock recently led the charge to get the SEC’s approval for a Bitcoin ETF.

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Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.