Led by Nikolaos Panigirtzoglou, a team of JPMorgan analysts set out a report that contested that the recent Wells notice that was issued to Robinhood Crypto by the U.S. SEC over alleged unregistered security offerings is least likely to hinder the potential approval of spot Ether ETFs.
Wells Notice to Robinhood Crypto
Robinhood Crypto, which offers various trading cryptocurrencies, including Bitcoin and Ether, received a Wells notice from the SEC earlier this week. The notice suggested that the SEC might file an enforcement action against the company for alleged securities violations.
The Wells notice appears to be a continued effort by the SEC to assert its aggressive approach of considering most cryptocurrencies as securities, excluding Bitcoin and Ether. However, much to the expectations, Gensler’s SEC has not given an explicit or clear definition as to why Ether is considered a security.
Impact on Spot Ether ETFs
JPMorgan analysts do not see this Wells notice as an obstacle to the approval of spot EtherETFs. The SEC’s approval process for these ETFs may follow a similar pattern to that of Bitcoin, where futures-based ETFs have already been approved. The analysts suggest that if the SEC denies the approval of spot Ether ETFs, it could face legal challenges similar to those seen with Bitcoin spot ETFs.
However, one interesting point to note is that the Wells notice to Robinhood does not imply that the SEC considers Ether security. The status of Ethereum is to be determined by legislation and court proceedings, states Panigirtzoglou, and there might eventually be a “middle” category for ether—neither commodity nor security.
Potential Disappointment in Markets
The JPMorgan report suggests that the potential rejection for a spot Ether ETF this month might not disappoint the markets as it was quite well expected. A good indicator that reflects the market is not interested in Ethereum ETFs at the moment is seen in the current discount to the net asset value of the Grayscale Ethereum Trust.
Moreover, Grayscale’s recent withdrawal of its Ether futures ETF application can serve as another key indicator that the company prefers to focus on converting its existing Ethereum trust into a spot Ethereum ETF. The SEC is expected to deny the approval of spot Ethereum ETFs, pushing the deadline for Grayscale to await the final decision on the VanEck spot Ethereum application to May 23rd.
In the end note, JPMorgan analysts have maintained that the Wells notice issued by the SEC to Robinhood Crypto does not seem to impact the trajectory of spot EtherETFs.