Will SEC be sued if Ethereum ETFs are rejected? Analysts weigh in

• Analysts are undecided on whether there will be litigation if there is an ETH ETF rejection in May. 
• But the odds of approval in May remain very low across the board. 

As the deadline draws closer, Ethereum [ETH] ETF approval odds in May seem unlikely. However, some have been quick to imagine what would happen if the ETH ETFs faced rejection in May. 

Could Grayscale, for example, sue the SEC as it did back in 2022 when the regulator rejected its application to convert GBTC to a spot Bitcoin [BTC] ETF? 

Bloomberg ETF analyst Eric Balchunas thinks Grayscale will likely not pursue litigation if ETH ETFs are rejected in May. Citing the limited market share of ETH ETF futures market compared to BTC’s, the analyst said,

“A lot of people assuming Grayscale (or someone) will sue SEC after they reject the Ether spot ETFs. I would question this as Ether futures only ETFs have 4% of the assets that Bitcoin futures have.”

The analyst added,

“That’s a lot of time and money for something that may only get a fraction of the aum.”

JPMorgan expects litigation in case of ETH ETF May rejection

Balchunas’ position is contrarian to that of JPMorgan analysts. In an interview with The Block, JPMorgan maintained an optimistic view of an eventual approval for spot ETH ETFs. 

JPMorgan lead analyst Nikolaos Panigirtzoglou noted that,

“If there is no spot Ethereum ETF approval in May, then we assume there is going to be a litigation process after May.”

However, executives from potential issuers like VanEck and CoinShares were pessimistic about May’s approval. 

In a recent CNBC interview, VanEck CEO, Jan van Eck, compared the spot BTC ETF approval process to its ETH ETF filing and stated that “right now, pins are dropping as far as Ethereum is concerned.”

On his part, CoinShares CEO Jean-Marie Mognetti said he didn’t expect an ETH ETF approval at all this year.

However, in late March, Grayscale CLO Graig Salm remained confident of May’s approval and cautioned that the regulator’s lack of engagement shouldn’t be considered to indicate a specific outcome. 

Even so, it remains to be seen whether a person or one of the potential issuers will pursue litigation if spot ETH ETF applications are rejected in May.