SEC delays decision on spot Ether ETFs amid growing pessimism

The United States Securities and Exchange Commission (SEC) recently postponed its decision on the proposed spot for Ether exchange-traded funds (ETFs) by Hashdex and ARK 21Shares. The decision, announced on Tuesday, March 19, comes shortly before the “third deadline” set by the agency for these applications. Both Ether ETF proposals are now slated for a final decision in late May, with May 24 earmarked for ARK 21Shares and May 30 for Hashdex.

Analysts turn pessimistic on approval prospects

Analysts have taken a more pessimistic stance regarding the likelihood of approval for the eight proposed Ether ETFs, including those from BlackRock, Grayscale, Fidelity, and others. Bloomberg ETF analyst James Seyffart expressed concerns over the lack of engagement between the SEC and the issuers, leading him to revise his outlook from cautiously optimistic to doubtful. Seyffart’s sentiments were echoed by Eric Balchunas, another Bloomberg ETF analyst, who lowered the approval odds for Ether ETFs from 50% to 35%.

Public sentiment on the approval of Ether ETFs has also dwindled, as evidenced by the decreasing odds on platforms like Polymarket. From January’s 77% odds of approval by the end of May, the probability has now plummeted to a mere 32%. Polymarket, a decentralized betting platform, has seen around $2.2 million wagered on the outcome of the Ether ETFs, indicating significant interest and concern among investors.

Grayscale considers adding staking to the Ether ETF application

Meanwhile, Grayscale, a prominent asset manager, has emerged as the latest issuer contemplating adding staking to its spot Ether ETF application. In a “consent solicitation statement” sent to investors of its Grayscale Ethereum Trust, the firm outlined proposals to enhance its capabilities. 

One of these proposals involves allowing the trust to stake Ether held within it, thereby participating in proof-of-stake validation protocols in exchange for consideration. Grayscale highlighted that staking Ether would help mitigate inflationary pressures from Ethereum’s proof-of-stake protocol and maintain parity with similar investment products offering staking options.

The proposals put forth by Grayscale are subject to a vote, requiring the consent of over 50% of shares for approval. If ratified, Grayscale would follow the footsteps of other issuers like ARK 21Shares, Franklin Templeton, and Fidelity, who have recently integrated Ether staking into their spot ETF applications.