Litecoin Drops 5% After SEC Delays ETF Filing Over Fraud Concerns

SEC has delayed the Litecoin ETF application from Canary Capital today, opening public comments on whether the proposal complies with regulatory requirements. LTC's price dropped 5% following this announcement.

The public comment opening does not seem to be a signal of the Commission's intent; this could be a standard delay tactic. However, the market immediately viewed this as a negative signal.

analysis of sec's decision

A few months ago, analysts suggested that the Litecoin ETF had a higher likelihood of being approved by SEC than any other altcoin ETF. Its Polymarket rate had reached 85% in February, and today's SEC deadline further increased excitement in the community.

However, SEC decided to delay this application, including requesting public comments in its notice:

"The Commission seeks and encourages interested persons to provide comments on the proposed rule change. The Commission requests commenters address the sufficiency of [whether] the proposal... is designed to prevent fraudulent and manipulative acts and practices or raise any new or unique concerns that the Commission has not previously considered," the notice reads.

Clearly, it is not certain that this request is a negative development. SEC is currently processing multiple altcoin ETF proposals, and has recently delayed some.

SEC has even opened public comments for a Litecoin ETF proposal in February. In other words, this could be a standard delay tactic. Unfortunately, the market did not receive this well.

Litecoin's price quickly dropped after the Commission delayed this application, falling 5% at its lowest point. The Polymarket rate for Litecoin ETF approval in Q2 2025 also dropped sharply, but the overall likelihood of approval in 2025 remains stable.

The most optimistic expectation listed Q2 as a potential time for altcoin ETF approval, and this bet now seems less feasible.

In other words, the situation could be much worse. James Seyffart, an ETF analyst, has predicted the Litecoin delay but did not comment on the public comment aspect. It seems premature to suggest that SEC is signaling intent to reject this altcoin ETF proposal or any other.

However, the market can react strongly to such developments in the short term, and traders are adjusting their bets on this altcoin.