Trading of recently approved spot Ethereum ETH +2.32% exchange-traded funds could begin well before November, according to JPMorgan.

"We view this ETF approval, and crypto more broadly, as an increasingly political issue ahead of the 2024 U.S. presidential election. As such, we expect trading of the spot ETH ETF to begin well-ahead of November," JPMorgan analysts led by Kenneth Worthington wrote in a report on Friday.

The U.S. Securities and Exchange Commission on Thursday approved 19b-4 forms of eight spot Ethereum ETF applicants — Grayscale, Bitwise, BlackRock, VanEck, Ark 21Shares, Invesco, Fidelity and Franklin — all in one omnibus order. S-1 registrations of those ETFs are still pending SEC sign-off so that the funds can begin trading. Several analysts expect trading to start in the coming weeks.

The SEC's sudden approval of ETH ETFs came as it re-engaged with stakeholders earlier this week, following months of stalled conversations.

'Staking remains controversial'

Spot Ethereum ETFs were approved likely because issuers removed staking references from their 19b-4 forms.

Staking is a key issue between fund issuers and the SEC because it remains unclear whether an issuer staking ETH on behalf of an ETF shareholder represents an investment contract and thus a security under the Howey test, the JPMorgan analysts said.

The SEC uses the Howey test, which originated from a 1946 U.S. Supreme Court decision, to help determine whether transactions are investment contracts and thus subject to securities laws. According to this test, a security exists when money is invested in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.

"The debate around staking seems to persist as we now understand the focus is on whether these issuers will/can retain such staking rewards for themselves," the analysts added.

Crypto FIT 21 bill

The ETH ETF approval coincidentally came a day after the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act, or the FIT 21 bill.

The bill essentially grants the U.S. Commodity Futures Trading Commission jurisdiction over crypto by identifying digital assets as "digital commodities" rather than "securities" where the SEC would instead have oversight.

"However, the bill’s chances at passing the Senate are lower, and the Biden administration has said it does not support the bill, but it also has not yet threatened a veto," the JPMorgan analysts said.