Industry insiders anticipate the Securities and Exchange Commission (SEC) will reject proposals for exchange-traded funds (ETFs) linked to the price of ether in the coming month, according to sources familiar with the matter.

Several firms, including VanEck and ARK Investment Management, have submitted applications to the SEC seeking approval for ETFs that would mirror the spot price movements of ether, the second-largest cryptocurrency by market capitalization. The SEC is slated to make decisions on VanEck’s and ARK’s applications by May 23 and May 24, respectively.

Meetings between these firms and the SEC in recent weeks have reportedly been disheartening, with agency staff offering little insight into the concerns surrounding the proposed ETFs. This stands in stark contrast to the extensive deliberations that preceded the approval of bitcoin-based ETFs earlier this year.

Led by crypto skeptic Gary Gensler, the SEC had historically rejected bitcoin ETFs due to concerns over market manipulation. However, pressure mounted after Grayscale Investments successfully challenged the SEC’s stance in court, leading to the recent approval of spot bitcoin ETFs. Despite arguments from ETF issuers citing precedents set by bitcoin ETFs and ether futures-based ETFs approved last year, the SEC appears poised to deny the current filings, signaling a setback for the cryptocurrency industry.

While some issuers intend to submit additional documentation to the SEC to prolong discussions, expectations of a rejection have already impacted ether’s price. Although the cryptocurrency has seen a modest increase in value this year, it has lagged behind bitcoin, which reached new all-time highs recently.

The SEC’s scrutiny of ether ETFs has been limited thus far, with only a few meetings reported, including one with crypto exchange Coinbase. Coinbase argued that the rationale behind approving bitcoin ETFs should extend to ether products, given the correlation between ether futures and the spot market.

If the SEC rejects the ether ETFs, it may be due to concerns regarding the availability and reliability of statistical data on the ether market. Some observers speculate that the SEC may require more time to assess the impact of ether futures trading before greenlighting spot ETFs.

Despite the anticipated rejection, some industry insiders believe that legal challenges could eventually pave the way for ether ETFs. However, for now, the prospect of approval remains uncertain, leaving the cryptocurrency market in a state of flux.

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