SEC Ethereum ETF decision unlikely driven by politics: Bernstein

Bernstein analysts Gautam Chhugani and Mahika Sapra believe the United States securities regulator likely approved the spot Ether ETFs to avoid a legal battle.

The United States securities regulator’s decision to approve the spot Ether (ETH) exchange-traded funds may not have been a last-minute decision driven by political pressure, according to analysts at research and brokerage firm Bernstein.

One of the leading theories behind the Securities and Exchange Commission’s sudden change in tone toward spot Ether ETFs in May was increased political pressure from the Democrats to win over swing voters in the lead-up to the U.S. election this November.

However, that narrative began looking less credible after President Joe Biden vetoed the SEC’s Staff Accounting Bulletin (SAB) No. 121 repeal bill, Bernstein analysts Gautam Chhugani and Mahika Sapra wrot in a June 3 report.

The analysts said the “SEC knew it was in a corner on ETH ETF” as it shared the same regulatory set-up as the spot Bitcoin ETFs — including the same spot and futures correlation and several live Ether futures products on the Chicago Mercantile Exchange — which implied Ether’s commodity status.

“[It’s likely the] SEC took a more pragmatic approach and avoided a legal battle.”

“Regardless, great outcome for the industry,” the Bernstein analysts added.

Bernstein said it had spoken with a few spot Ether ETF applicants who were “equally surprised” with the SEC’s last-minute approval.

“No one expected an Ethereum ETF approval by the SEC. SEC staff’s radio silence in the run-up to the approval date, was interpreted as likely denial. However, ETF issuers were asked to refile the 19b-4s within 24 hours, 4 days before approval date. “

Related: SEC’s ETF decision means ETH and ’a lot’ of other tokens are not securities

Like most analysts, Bernstein expects the spot Ether ETF flows to be far lower than Bitcoin’s, though there “should be pent-up demand from the same participants as the Bitcoin ETF.”

The firm expects Ether to experience positive price action in the lead-up to launch.

The SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy and Bitwise to issue spot Ether ETFs on May 23.

The eight approved Ether ETF issuers are now awaiting for the S-1 registration statements to be signed off by the SEC, which may take anywhere between weeks to months.