US SEC’s Willingness to Approve ETH ETFs Causes Speculation That Gary Gensler Is Losing Control

Last week, the US Securities and Exchange Commission (SEC) updated the 19b-4 filings for Spot Ethereum ETFs. By changing the rules, the regulator expressed willingness to approve Ethereum ETFs, despite the SEC Chair Gary Gensler suggesting a likely denial.

A Power Shift Within the SEC?

Gensler has been one of the biggest opponents of crypto ETFs among US regulators, which led to many being surprised when the SEC approved Bitcoin ETFs early in 2024.

Now, less than half a year later, crypto companies are pushing for an ETH ETF approval, and while Gensler is again saying no. However, the SEC Trading and Markets Division has approved several spot ETH ETFs through delegated authority, instead of the vote by the full commission.

This approval covers 19b-4 filings from major financial institutions, including BlackRock, VanEck, Fidelity, Grayscale, Invesco Galaxy, Bitwise, and Franklin Templeton.

With the SEC apparently changing its mind about crypto ETFs, the digital asset community started speculating about the situation within the organization, including the differing opinions and internal dynamics between various SEC commissioners or, potentially, external pressures that may have affected the members’ stance.

As mentioned, Gary Gensler’s resistance toward crypto ETFs is a well-documented matter. He explained his approach as cautious, which aligns with the SEC’s purpose to protect investors and enable fair, efficient markets. However, the official order that stated “For the Commission, by the Division of Trading and Markets, pursuant to delegated authority” has brought the inner workings of the regulator into question.

The shift in the SEC’s position on the ETH ETF matter suggests a shift in the power dynamics within the agency itself, especially with the US elections approaching.

The SEC’s Decision Already Affected the Crypto Market

The SEC’s apparent willingness to approve Ethereum spot ETFs also led to increased activity in the crypto market. Ethereum itself saw a 20% price surge on May 20/21, making it the largest daily gain in market cap.

The coin went up by 17.8% between 22:46 on May 20 and 00:46 on May 21, when trading volume skyrocketed to over $21 billion, marking a 618% increase according to the CCIX index for the ETH-USD pair.

Open interest in ETH pairs also rose by almost 30% to an all-time high of $13.7 trillion.

However, while the SEC suggests it might approve the ETFs, the battle has not yet been won. In order for them to launch, the SEC has to approve the S-1 applications, which were historically quite slow, at least when Bitcoin applications were in question.

While the process could take months, it is also possible that the regulator might accelerate the reviews, which could bring the launch of ETH ETFs sooner than expected. The ETFs will not include staking, even if approved, as the SEC decided against allowing it, even though stakeholders initially wanted to see it included.

Even so, the approval of Ethereum spot ETFs will likely lead to an elevated interest in the Ethereum ecosystem, boosting the network usage, and supporting its deflationary status.