SEC delays Invesco Galaxy spot ETH ETF, but May decisions are still expected

The U.S. Securities and Exchange Commission (SEC) extended the decision period for Invesco and Galaxy’s spot Ethereum ETF on Feb. 6.

The agency’s announcement specifically concerns a proposed rule change from Cboe BZX that would allow it to list and trade shares of the fund.

The SEC said that the proposed rule change was published for comment in the Federal Register on Nov. 8, 2023. The agency then designated a longer period for approval on Dec. 13, 2023, extending the period during which it could approve, disapprove, or institute proceedings around approval or disapproval.

The agency’s latest filing indicates that it has chosen the last option, thereby instituting proceedings for around approval or disapproval. The proceedings request that commenters address fraud prevention, market manipulation, and investor protections. These issues are at play for all other pending Ethereum ETF proposals and were also key to the approval of spot Bitcoin ETFs in January.

The SEC did not provide exact deadlines today. It said that comments should be submitted within 21 days of publication in the Federal Register, and that rebuttal comments should be submitted within 35 days of publication in the same.

SEC expected to decide on ETH ETFs by May

The extension does not affect broader approval timelines for ETH ETFs. Bloomberg ETF analyst James Seyffart acknowledged the delay, writing:

“[The] SEC just delayed [Invesco and Galaxy’s] Ethereum ETF. [This was] 100% expected and more delays will continue to happen in coming months. The only date that matters for spot Ethereum ETFs at this time is May 23rd. Which is VanEck’s final deadline date.”

It is likely that the SEC will decide on multiple similar proposals at the same time, including those that have later deadlines than VanEck’s proposal.

The SEC has delayed various other spot Ethereum ETFs in past weeks. The agency extended the decision period on applications from Fidelity on Jan. 18, BlackRock on Jan. 24, and Grayscale on Jan. 25. Once again, those delays do not affect the broader May decision deadline described by Seyffart.

It is unclear whether the SEC will choose to approve a spot Ethereum ETF. One Polymarket prediction market currently suggests 43% odds of approval by May. Seyffart has suggested a 60% chance of approval by May, while one JP Morgan member has suggested a 50% chance of approval. A TD Cowen research group believes that a spot Ethereum ETF will not be approved in May.