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Spot Ether ETFs will come down to a vote of 5 people: Gensler the decision maker?

The fate of Ether (ETH) spot exchange-traded funds could be decided this week by a single vote from Gary Gensler, chairman of the U.S. Securities and Exchange Commission – if history is any indication.

In January, approval of spot Bitcoin ETFs was handed over to a panel of five commissioners. Two crypto-friendly commissioners, Hester Pierce and Mark Uyeda, voted in favor of ETFs, while commissioners Caroline Crenshaw and Jaime Lizárraga voted against.

Gensler also voted to approve it, leading many to believe that his vote ultimately secured approval for Bitcoin Spot ETFs, which were approved by a 3-2 vote on January 10, 2024.

SEC Final Committee Votes for Spot Bitcoin ETF. Source: SEC

This week, the same five SEC commissioners are expected to vote on whether to approve or deny VanEck’s spot Ether ETF on May 23. Here’s what we know about them.

Hester Peirce

Peirce earned the nickname “Crypto Mom” for a reason: she is bullish on digital assets and wants to see more decentralization integrated into the broader financial system.

She did not confirm how she would vote on the spot for Ether ETFs.

However, she has become integrated into the Ethereum community, having attended and spoken at ETHDenver in Colorado in late February.

Hester Peirce (left) speaking at ETHDenver. Source: ETHDenver

Peirce has criticized the SEC’s approach to oversight of the cryptocurrency industry in the past, calling parts of the securities regulator’s approach “unproductive” and “unnecessary.”

Caroline Crenshaw

Crenshaw is a staunch critic of the cryptocurrency industry and was a staunch dissenter in the Bitcoin ETF one-time decision.

At the time, Crenshaw said the price of spot Bitcoin ETFs would be affected by fraud and market manipulation across the industry – and that by approving Bitcoin products, the SEC would fail to protect the American investors.

There is no evidence to suggest that Crenshaw has changed his mind on crypto spot ETFs since then.

Caroline Crenshaw. Source: SEC

“There is little or no systemic oversight of these markets, nor other sufficient mechanisms in place to detect and deter fraud and manipulation,” Crenshaw said in dissent for Bitcoin spot ETFs.

“(Spot trading) is fragmented and dispersed across different international trading venues, with many markets not subject to significant regulation,” she added.

Marc Uyeda

Besides Peirce, Uyeda was the only other commissioner to criticize the SEC for its “regulation by enforcement” approach to the cryptocurrency industry.

He disagreed with the SEC’s decision to reject a petition from Coinbase last December, which accused the agency of behaving arbitrarily and capriciously in its refusal to adapt the rules to clarify oversight of the sector.

Uyeda also voted to approve spot Bitcoin ETFs, but expressed “strong concerns” about how the SEC reached its decision.

Mark Uyeda (right) speaking at the Milken Institute conference. Source: Eleanor Terrett

It claims the Commission departed from its “significant market” test used to decide exchange-traded products and instead approved spot Bitcoin ETFs through “other means.”

Uyeda called the SEC’s reasoning “flawed” but cited “independent reasons” behind its decision to vote in favor of spot Bitcoin ETFs.

However, it is not clear what these “independent reasons” are, let alone whether they will also apply to spot Ether ETFs.

Jaime Lizarraga

Lizárraga voted against approving spot Bitcoin ETFs and was the only commissioner who did not issue a statement following the decision.

However, he reportedly said the promise of Bitcoin as a “viable alternative to traditional finance” and “true financial inclusiveness” had not been achieved in a speech at Brooklyn Law School in November 2022.

At the time, he opposed the idea that the SEC would take a “regulation by enforcement” approach to the cryptocurrency industry.

Jaime Lizarraga. Source: SEC

He also believes that most cryptocurrencies are subject to U.S. securities laws and, therefore, operate illegally.

There is no evidence to suggest that he has changed his views since the approval of spot Bitcoin ETFs.

Gary Gensler

While Gensler voted in favor of spot Bitcoin ETFs in January, some believe he was forced to do so because Grayscale had won its appeal against the regulator months earlier.

It is unclear whether it will approach the current round of Ether ETF applications in the same way.

Gary Gensler speaking with CNBC about cryptocurrency regulation. Source: CNBC

Earlier this month, Gensler confirmed that the SEC’s decision was still under review in a May 7 interview with CNBC:

“This is something that is currently before our committee. We are a Commission of five members, and these files will be dealt with at the appropriate time.

Gensler was also recently accused of avoiding answering whether Ether is a security – even when asked by Congress.

Deadlines for Ether ETF applications before the SEC. Source: James Seyffart

Meanwhile, other potential problems are underway. There is an investigation into Ether’s status as a potential security – led by SEC Enforcement Division Director Gurbir Grewal.

A few fund managers also claimed that the SEC was less engaged with Ether spot ETFs. The lawyer for one of these applicants, Bitwise, reportedly said that a few fund managers now expect a refusal from the SEC this week.

Related: Gary Gensler Resignation “Troll” Post Disappoints Crypto

More recently, Nate Geraci, president of The ETF Store, noted that it was technically possible for the SEC to approve 19b-4 applications (exchange rule changes) but prevent an immediate launch by delaying S-1 applications ( registration statements).

Source: Nate Geraci

Bloomberg ETF analysts Eric Balchunas and James Seyffart predict that there is a 25% chance that at least one Spot Ether ETF will be approved on May 23 – that figure has increased from 70% since January.

Review: Crypto Regulation: Does SEC Chairman Gary Gensler Have the Final Say?