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TD Cowen: Spot Ethereum ETF Approval Unlikely to Happen in 2024
In a recent note, investment bank TD Cowen has doubled down on its prediction that the approval of spot Ethereum (ETH) exchange-traded funds (ETFs) will not happen any time soon. According to TD Cowen, the United States Securities and Exchange Commission (SEC) will take its time before any more approvals of this sort. The note also contains a likely timeline for the approval:
“We do not expect the SEC in 2024 to approve a spot Ethereum ETF. This is a political call. We believe there is no upside for SEC Chair Gary Gensler to approve a spot Ethereum ETF given how upset progressive Democrats were over the agency’s approval of a spot Bitcoin ETF earlier this month.”
Gensler Not in a Hurry to Approve Spot Ethereum ETF
Led by Jaret Seiberg, the TD Cowen Washington Research Group had previously noted that SEC Chair Gary Gensler is “taking a go-slow approach” with the ETH ETF. According to the note, one of the reasons for this approach is that Gensler’s tenure runs until June 2026. This gives the Chair quite a bit of time to wade through court cases and more enforcement action, instead of supporting legislation. Essentially, TD Cowen believes that “Gensler is in no hurry to act”.
After rejecting applications for over a decade, the SEC approved spot Bitcoin ETFs earlier this month. Since the first application by Cameron and Tyler Winklevoss’ Gemini in 2013, the SEC has disapproved all proposals due to fraud concerns. Consequently, recent submissions seemed to address these concerns by including a surveillance-sharing agreement (SSA), which promotes market transparency and reduces the risk of fraud. While this contributed to the SEC’s recent decision to approve, another major factor is a court ruling against the agency.
Grayscale Investments had dragged the SEC to court after the Commission’s 2022 refusal of the company’s proposal to convert its Grayscale Bitcoin Trust (GBTC) to an ETF. The company accused the Commission of “failing to apply consistent treatment to similar investment vehicles”. According to Grayscale, the SEC was “acting arbitrarily and capriciously”. After the SEC lost the case, it seemed that approval was only a matter of time.
TD Cowen Believes Gensler Is Treading Carefully on ETH ETF
TD Cowen writes that Gensler might be unwilling to upset progressives any further as he would need them for any agenda he intends to push this year. Also, the investment bank believes that Gensler’s possible interest in other roles, such as Treasury Secretary, might not come to fruition even if President Joe Biden wins a second term if the progressives are not on his side. The note also adds that Gensler would also like to monitor the performance of spot Bitcoin ETFs before approving ETH products.
So far, more than a dozen applicants have submitted proposals for spot ETH ETFs to the SEC. Last week, the Commission delayed decisions on Grayscale’s and BlackRock’s applications, stating that it needed more time to consider certain uses. For Grayscale, the SEC has instituted certain proceedings, including calling for public comments on the ETF.
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TD Cowen: Spot Ethereum ETF Approval Unlikely to Happen in 2024