May brings hope for Grayscale CLO as SEC approval for spot Ether ETFs is expected

Grayscale’s CLO, Craig Salm, is confident that the SEC will approve spot Ether (ETH) exchange-traded funds (ETFs) by May 2024. Salm’s optimism is based on the SEC’s previous meetings with Grayscale before approving Bitcoin ETFs. These meetings discussed important operational aspects such as creation/redemption procedures, contributions in cash or in-kind, authorized participants (APs), liquidity providers (LPs), and custody issues.

Salm argues that the case for Ethereum ETFs is similar to that of Bitcoin ETFs, as many of the issues resolved for Bitcoin ETFs are directly applicable to Ethereum ETFs. The main difference between the two products is the underlying assets. Salm believes that the SEC has already engaged in many ways, so issuers have less to engage with this time.

Salm also mentions the recent approval of Ether Futures ETFs and their classification as commodity futures, which he sees as another argument for a positive regulatory outcome. He believes that the high correlation between futures and spot products strengthens the case for approving spot Ether ETFs.

Salm points out that other industry insiders, like Paul Grewal, have echoed these sentiments. Grewal, the chief legal officer for Coinbase, argued that there was no valid reason for the SEC to deny ETH ETP applications. He referred to statements from SEC officials who stated that ETH was not a security.

However, not all industry observers share Salm’s optimism. Bloomberg ETF analysts Eric Balchunas and James Seyffart have expressed concerns about the SEC’s lack of engagement, lowering their expectations for an approved spot Ether ETF in May to 25%. Balchunas believes that this stance is intentional rather than mere procrastination.

Currently, the SEC has received filings from various companies, including BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Franklin Templeton, and Hashdex. The deadline for VanECK’s application is May 23.