U.S. SEC Initiates Gray Spot Ether ETF Review Process, Decision Extends Deadline

In a major development for the cryptocurrency market, the U.S. Securities and Exchange Commission (SEC) has initiated a review process for Grayscale Investments’ application for an Ether ETF spot and extended the decision period.

Grayscale Ether ETF Review Period

Grayscale filed a petition with the SEC on October 10, 2023 seeking approval to list and trade Grayscale Ether Trust Shares on the New York Stock Exchange (NYSE) Arca under the Commodity-Based Trust Shares Rule.Bitcoin Miner

The proposal was published for public comment in the Federal Register on October 27th. In response to similar steps taken by the SEC prior to its Jan. 11 approval of the Bitcoin Spot Exchange Exchange Traded Fund, the SEC provided an extended period to approve, disapprove or initiate proceedings regarding the proposed rule change.

With the initiation of the review process, the SEC said it will “thoroughly” analyze whether to approve or disapprove the proposed rule change. The Commission’s initiation of the review process does not indicate any predetermined conclusions, but rather reflects the need for further review of the legal and policy issues associated with the Ether ETF application.BITMAIN Antminer E9 Pro

In particular, the SEC emphasizes the need to consider whether the proposed rule change is consistent with Section 6(b)(5) of the Securities Exchange Act of 1934, which requires that the rules of national securities exchanges prevent fraud and manipulation, protect investors, and serve the public interest.

The SEC also encourages interested parties to provide comments addressing the adequacy of the stock exchange statements related to the proposed rule change and any other issues related to the proposed rule change.

SEC Request for Feedback

The Commission raises several questions for commenters to answer, including the appropriateness of listing and trading shares under NYSE Arca Rule 8.201-E given the nature of the underlying assets held in the trust.

The SEC also looked to the Exchange’s arguments regarding listing and trading spot bitcoin exchange-traded products (ETPs) for additional comments.

Individuals and organizations interested in the Ether ETF application are welcome to submit written data, views and arguments regarding the consistency of the proposed rule change with the Act and its provisions. While oral presentations are not deemed necessary at this stage, the Commission will consider requests for such presentations.

While 11 Bitcoin Spot Exchange Traded Funds were recently approved, uncertainty remains regarding future Commission action regarding the approval of Ether ETF applications.

In addition, the SEC’s classification of Ether as a “security” and how that classification impacted the decision-making process for the 12 Ether ETF applications. Notably, the SEC views Bitcoin as the only commodity in the cryptocurrency market.