According to Variant Fund Chief Legal Officer Jake Chervinsky, the Security and Exchange Commission’s denial of spot ether exchange-traded funds in the United States by the May deadline is more likely than people think.

“I’m not saying for certain that the spot ETH -0.15% ETF won’t be approved by May 23,” Chervinsky posted on X. “I’m just saying that the legal issues and policy environment in DC make denial (or an SEC request to withdraw) more likely than general sentiment suggests.”

With U.S. spot bitcoin ETFs launching successfully in January, attention has turned toward the prospect of spot ether ETF approvals by regulators in Washington, DC.  However, SEC Chair Gary Gensler has stated that the agency’s approval of spot bitcoin ETFs was limited to the single cryptocurrency and “shouldn’t be read to be anything more than that.” Further uncertainties remain surrounding spot ether ETF approvals, given Gensler's stance that cryptocurrencies other than bitcoin are securities.

Big-name firms, including BlackRock, Fidelity and Franklin Templeton have applied for a spot ether ETF over the last few months. While many in the crypto community have cited BlackRock’s record of just one ETF denial in its history as a positive indicator of a spot ether ETF approval, Chervinsky seemingly disagrees. “‘BlackRock always wins’ is a lazy bull take,” the former Compound Labs General Counsel added.

Opinions vary on spot ether ETF approval and significance

In January, Bloomberg ETF analyst Eric Balchunas suggested there was a 70% possibility for approval by May 23 — the final deadline for the SEC to rule on a spot ether ETF application from Ark and 21Shares, the first that was filed.

In response to Chervinsky’s remarks, Balchunas said he and fellow ETF analyst James Seyffart would have new formal odds out soon. “But to be honest, and no offense to the Ethereum people but this is such small potatoes vs spot bitcoin ETFs. It's like the opening act coming on after the headliner. Using GenX bands it's like Sister Hazel trying to follow Nirvana,” he added.

The ETF Store President, Nate Geraci, disagreed with Balchunas. “Will go out on a limb early and predict spot ether ETFs will be a bigger deal than everyone thinks,” he said. “Spot bitcoin ETF demand was also severely underestimated. Whether you like it or not, ether has 1/3 market cap of bitcoin. The spot bitcoin ETF category is already approximately $50 billion. Basic math IMO.”

“Yeah I’ll stick with my Sister Hazel metaphor which is not saying ether and Hazel aren’t popular but not in Nirvana’s league. They sold 2 million albums to Nirvana's 75 million. [Bitcoin futures ETF] BITO has $2.5 billion. [Ether futures ETF] EETH has $25 million. And that’s why it’s hard to get as into it’s approval process vs bitcoin,” Balchunas replied.

Ethereum educator and angel investor Anthony Sassano also disagreed. “This comparison makes no sense at all,” he said. “BITO launched at the pico top of the last cycle and EETH launched in the middle of the bitcoin spot ETF race (meaning that people assumed a spot ETH would be coming next).”

Sassano suggested that a more appropriate comparison would be between Grayscale's products GBTC and ETHE, noting that prior to its ETF conversion on January 10, GBTC had $30 billion in assets under management, while ETHE stood at $7.3 billion.

Are spot ether ETF approvals more likely in August?

Ikigai asset management founder Travis Kling argued that expectations were more concentrated around August than May, coinciding with BlackRock’s deadline on August. 7. “Makes sense and I agree that’s the sophisticated take,” Chervinsky replied. However, “I just don’t see anything changing in law, policy, or politics to make August more likely than May,” he added.

Others suggested that, as with the conversion of its GBTC fund to a spot bitcoin ETF, Grayscale may sue the agency if it denies a similar application for a spot ether ETF. “Maybe. There’s an argument for waiting to see who wins the election instead of spending time and money on litigation right away,” Chervinsky wrote. “Regardless, this SEC hasn’t shown much fear of losing in court. Chair Gensler’s view seems to be 'if we’re not losing, we aren’t aggressive enough.'”