The SEC is on a crusade against ETH. Experts agree that the Ethereum spot ETF is unlikely to be approved in May. Not everyone sees this as a problem.

The possibility of approval of an Ethereum (ETH ) spot exchange-traded fund (ETF) in May is now uncertain, prompting speculation within the cryptocurrency community. Many experts are skeptical about the approval.

The SEC is going after Ethereum

The SEC's subpoena of cryptocurrency companies to investigate their interactions with the Ethereum Foundation has increased uncertainty around the approval process, while the SEC's apparent non-involvement with ETFs applicants has added to the doubt.

Alex Thorn, head of firm-wide research at Galaxy Digital, highlighted the unusual nature of the SEC's actions , especially given the time that has passed since Ethereum's initial coin offering (ICO) in 2014.

After the approval of Bitcoin (BTC) spot ETFs, the outlook for the Ethereum ETF was bright and the price of the second largest cryptocurrency by market capitalization reacted positively. But now the situation has turned around and Ethereum is lagging behind the rest of the market.

Ethereum price evolution since BTC ETF approval

Speculation is rife that the SEC is making efforts to potentially classify Ethereum as a security , fueled by Chairman Gary Gensler's silence on the matter.

The “Merge” network upgrade in 2022, which converted Ethereum from a Proof-of-Work consensus mechanism to a Proof-of-Stake, further complicated the SEC’s view of Ethereum. The commission sees Proof-of-Stake as a system that is more prone to fraud and manipulation .

Despite these concerns, the SEC did not prevent the launch of ETFs based on Ethereum futures in 2023, i.e. already after the transition of Ethereum to Proof-of-Stake.

However, it has not yet approved spot ETFs and has already postponed the approval decision twice .

It would mean a significant escalation of SEC enforcement actions.

A drop of optimism

Other experts disagree with Thorne and don't see as many negatives  in a possible further delay of the ETH ETF.

For example, Bitwise's chief investment officer, Matt Hougan, suggested that delaying the approval of the spot Ethereum ETF could be beneficial . According to him, a later approval could bring a higher inflow of funds.

Hougan believes that the traditional financial sector, particularly Wall Street, could benefit from additional time to fully understand and integrate bitcoin ETFs before jumping into other cryptocurrency products such as ether ETFs.

"A period of roughly 8 to 9 months would be a good time frame for these institutions to 'digest' new bitcoin offerings," he said.