A spot Ethereum exchange-traded fund (ETF) could hit the market sooner than expected, says Coinbase, despite growing industry observer pessimism.

In a note this week, America’s biggest cryptocurrency exchange said that “while there is uncertainty around a timely approval given the SEC’s apparent silence with issuers,” it’s only a matter of time before such a product hits the market. 

There’s a long list of top asset managers—including VanEck, BlackRock, and Franklin Templeton—who have filed paperwork with the Securities and Exchange Commission to release an Ethereum ETF. 

Such a product would give investors exposure to ETH, the second biggest digital coin by market cap, via shares that trade on a stock exchange.

But Wall Street’s biggest regulator has been slow to give a response to applicants, and has pushed back decision deadlines, echoing its earlier approach to spot Bitcoin ETF approvals before finally pulling the trigger in January.

This is usually normal in the ETF application process, but the SEC’s reluctance to talk about the investment vehicles has led analysts from the likes of Bloomberg and CoinShares to say that such crypto funds would not get the green light by the May deadline.

“As crypto begins to take form as an election issue, it’s also less certain in our view that the SEC would be willing to front the political capital necessary to support a denial,” wrote David Han, institutional research analyst at Coinbase.

“Even if the first deadline on May 23, 2024 encounters a rejection,” he added, “we think there is a high likelihood that litigation could reverse that decision.”

Last year, crypto fund manager Grayscale won an appeal against the SEC to convert its Bitcoin fund into a spot ETF in a high-profile case.

The SEC then reluctantly said yes to 11 Bitcoin ETFs on January 10. The investment products have since been massively successful, taking in billions of dollars of inflows. 

Edited by Andrew Hayward