Galaxy Digital’s Head of Research, Alex Thorn, has put forward a conjecture suggesting a noteworthy shift in the approach of the U.S. Securities and Exchange Commission (SEC) regarding the approval process for spot Ethereum exchange-traded funds (ETFs).
In a recent X post dated May 21, Thorn deliberated on the possibility that the SEC might delineate a nuanced differentiation between Ethereum and staked Ethereum, potentially categorizing the latter as a security.
This prospective distinction carries substantial implications for the fate of spot Ethereum ETFs, which have faced reluctance from the SEC in obtaining approval thus far.
Thorn posits that such a strategic pivot would harmonize with the SEC’s ongoing legal disputes and inquiries, providing a potential pathway for the commission to sanction Ethereum ETFs while adhering to its established legal arguments and stances. However, Thorn suggests that this approach might also entail specific constraints on spot Ethereum ETFs.
Through the differentiation between ETH and staked ETH, the SEC could maneuver through the intricate regulatory terrain, potentially paving the way for the introduction of Ethereum ETFs while upholding a stringent regulatory framework concerning staked assets and alternative cryptocurrencies. Nonetheless, the precise manner in which the SEC would treat tokenized iterations of Ethereum or Bitcoin for use in layer-2 solutions, including lending, remains ambiguous.
In response to the speculation that the SEC might indeed approve spot ETH ETFs, Ethereum witnessed a notable surge of over 17%, diverging from the prior market consensus that the regulatory body would not grant its approval.
Eric Balchunas, a senior analyst at Bloomberg, who previously assessed the likelihood of spot Ethereum ETF approval as “slim to none,” reversed his stance on May 20. In a subsequent X post, he raised the probability of approval from 25% to 75%, implying that the accelerated pace at which the SEC is considering ETF approvals could be a consequence of mounting political pressure. This shift in perspective is notable, given the SEC’s previous minimal engagement with ETF applicants.
