The launch of a U.S. spot Ethereum exchange-traded fund (ETF) that many expected to launch as early as July 2 has been delayed by the U.S. Securities and Exchange Commission (SEC).
On June 29, The Block reported that the SEC had returned the S-1 form to potential Ethereum ETF issuers with a small number of comments, requiring them to process the comments and resubmit them by July 8.
Once the form is returned, it won’t be a final filing, the source said, meaning at least one more round of filings will be required before the ETF can finally begin trading.
SEC Delays Process
The SEC commented on the S-1 form and requested a resubmission by July 8. According to Balchunas, this new timeline means that the launch of a spot Ethereum ETF may be delayed until at least mid-to-late July.
Nate Geraci, president of ETF Store, noted that the last round of S-1 amendments was relatively minor, and the SEC is expected to approve issuers to trade within 14-21 days. Although the exact timeline remains uncertain, the SEC has indicated that it could be launched this summer.
Earlier in early June, Balchunas predicted that the ETF would be launched in early July because the SEC staff did not make significant comments on the ETF applicant's S-1 filing, but this now seems impossible.
The two-step process of an Ethereum ETF
The approval of the Form S-1 is the second part of the two-step process required to list an ETF. The first part involved the approval of the issuer's Form 19b-4 in May. On May 23, the SEC approved the Form 19b-4s of eight ETF bidders.
Unlike Form 19b-4, Form S-1 is not subject to a specific deadline and issuers can rely on the SEC’s timeline for review.
The SEC has approved a rule change to allow major issuers to participate in the process, including BlackRock, Fidelity, 21Shares, Grayscale, Franklin Templeton, VanEck, iShares and Invesco. In addition, issuers such as VanEck have filed Form 8-A to prepare for listing on the exchange by July 8.
Although on June 26, U.S. Securities and Exchange Commission Chairman Gary Gensler previously said that approval of an Ethereum ETF could take place “sometime this summer,” no clearer timeline was provided.
While there were reports that the ETF could be listed as early as July 4, that is no longer possible. Issuers do not yet know when the ETF will be listed. They will only know the exact listing date once the SEC gives them a deadline to submit final documents.
The SEC places the onus of listing an ether ETF on the applicants, claiming that the process is entirely dependent on their response time.
Eric Balchunas, ETF analyst at Bloomberg, wrote on the X platform, “It looks like we’ll have to postpone the expected listing of the spot Ethereum ETF until after the holiday. I heard that the SEC spent more time responding to people this week (although only some very minor adjustments), and from what I heard, next week will be relatively idle due to the holiday, and the approval process will resume on July 8, and then they will start listing soon.”
Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), recently said that he expects to see a spot Ethereum ETF listed as early as September.
The significance of Ethereum ETF listing
Galaxy Research said in a report that once the Ethereum spot ETF is approved for trading, monthly net inflows could reach $1 billion.
It is expected that the net inflow of ETH ETF in the first five months will reach 20-50% of the net inflow of BTC ETF. Galaxy's target is 30%, which means a net inflow of US$1 billion per month.
At the same time, Galaxy warned that demand for spot Ethereum ETFs could be limited due to a lack of staking rewards.
Outflows from the Grayscale Ethereum Trust (ETHE) could also drag down inflows into the Ethereum ETF, with Galaxy estimating that these negative outflows could amount to around 319,000 ETH or $1.1 billion per month.
Bitwise believes that $15 billion in inflows over the next 18 months is a good start. The agency believes that ETH is a compelling asset that powers the world's most versatile blockchain. Even $15 billion in net new demand will have a huge impact on the Ethereum market.
