Ether ETFs Fate Hinges on 5-Person Vote with Gensler as Key Decider

The potential approval of spot Ether ETFs hinges on a pivotal vote from Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), much like what occurred with spot Bitcoin ETFs earlier this year. Back in January, the fate of these Bitcoin ETFs was decided by a narrow 3-2 vote from a five-member SEC panel. Two commissioners, Hester Peirce and Mark Uyeda, who are known for their favorable stance on cryptocurrencies, voted for the approval. In contrast, Commissioners Caroline Crenshaw and Jaime Lizárraga opposed it. Gensler’s vote swayed the decision towards approval.

This week, the SEC will cast another significant vote, this time on VanEck’s proposed spot Ether ETF. The same five commissioners will decide its fate on May 23. Thus, examining the commissioners’ previous stances on cryptocurrency is crucial in predicting the outcome.

Hester Peirce, also known as “Crypto Mom,” has been a vocal supporter of blockchain technology and decentralization in financial systems. She actively participates in the Ethereum community and has criticized the SEC’s regulatory approach to cryptocurrency as sometimes being “unproductive” and “pointless.” While Peirce has not disclosed how she will vote on the Ether ETFs, her past actions suggest a favorable disposition towards crypto advancements.

Caroline Crenshaw has been one of the strongest critics of cryptocurrency within the SEC. She strongly opposed the approval of spot Bitcoin ETFs, warning of vulnerabilities to fraud and market manipulation, which she believes the SEC has not adequately addressed. Her skepticism towards the lack of systemic oversight continues, indicating that she is likely to vote against the spot Ether ETFs.

Commissioner Mark Uyeda, another pro-crypto voice, has criticized the SEC for its “regulation by enforcement” approach. He disagreed with the SEC’s decision last December to deny a Coinbase petition and also voted to approve the spot Bitcoin ETFs, albeit with reservations about the Commission’s rationale. Uyeda’s criticisms of the SEC’s methods hint at his likely support for the approval of spot Ether ETFs, mirroring his pro-crypto stance.

Commissioner Jaime Lizárraga, who opposed the Bitcoin ETF approval and subsequently refrained from issuing a statement, remains a critical voice against the cryptocurrency sector. He argues that the aims of cryptocurrencies to serve as a viable alternative to traditional finance have yet to be realized. Lizárraga views most cryptocurrencies as operating illegally under U.S. securities laws. There are no signs that his outlook has shifted since the Bitcoin ETF decision, making his support for the Ether ETFs doubtful.

Gary Gensler’s vote will be pivotal once again, but his stance remains uncertain. While he voted to approve the Bitcoin ETFs, it is speculated that he may have been influenced by legal pressures, such as the Grayscale appeal. Gensler recently emphasized that the SEC is still reviewing Ether ETF applications, indicating unpredictability in his final vote. His known reticence on categorizing Ether as a security only adds to the uncertainty.

There are ongoing investigations into whether Ether qualifies as a security, led by SEC’s Gurbir Grewal. This could affect Gensler’s and other commissioners’ decisions. Several fund managers seeking approval for Ether ETFs have also commented on the SEC’s lack of engagement on the matter, suggesting a possible rejection this week. A representative from one applicant, Bitwise, has already expressed an expectation of denial by the SEC.

Nate Geraci, President of The ETF Store, mentioned a procedural possibility where the SEC could technically approve the exchange rule changes but delay the actual launch by holding up the registration statements. This adds yet another layer of complexity to the situation. According to Bloomberg ETF analysts Eric Balchunas and James Seyffart, the probability of an Ether ETF approval has decreased significantly from 70% in January to just 25%, reflecting the increasingly cautious outlook surrounding these decisions.