The crypto world has reached a pivotal regulatory milestone. On May 23, 2025, the U.S. Securities and Exchange Commission (SEC) officially approved all spot Ethereum exchange-traded funds (ETFs), opening a new traditional financial channel for investors to gain exposure to Ethereum. This decision marks a significant endorsement of the cryptocurrency industry and follows the earlier approval of spot Bitcoin ETFs, making Ethereum the second major digital asset to receive such regulatory validation.
While the approval of multiple 19b-4 filings—submitted by major financial institutions including BlackRock, Fidelity, and Grayscale—signals strong progress, trading cannot begin immediately. Issuers must still have their S-1 registration statements declared effective by the SEC. The agency has only recently begun discussions with issuers on these filings, and revisions may be required. Although the timeline remains uncertain, Bloomberg analysts estimate this process could take several weeks.
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Market Reaction: Calm After the Storm
Following the announcement, Ethereum’s price saw a modest uptick, fluctuating around $3,800 with a peak at $3,856. As of the latest data, ETH is trading at $3,807, reflecting a 24-hour gain of 1.3%. Notably, the market reaction was less volatile than in previous days, suggesting that the approval had already been largely priced in.
Just days earlier, expectations were far from optimistic. Headlines like “Will ETH Surge 20%? Could SEC Surprise with Ethereum ETF Approval?” reflected widespread skepticism. However, sentiment shifted rapidly when Bloomberg analyst Eric Balchunas raised his estimated approval odds from 25% to 75%, citing unconfirmed reports of a potential 180-degree turn by the SEC—possibly influenced by political dynamics.
Further fueling speculation, Fox News reporter Eleanor Terrett quoted sources saying, “Things are evolving in real time,” indicating that the long-assumed denial might no longer be certain. CoinDesk later reported that the SEC requested exchanges to accelerate updates to their 19b-4 filings for spot Ethereum ETFs.
Three insiders revealed that SEC officials unexpectedly instructed Nasdaq and Cboe to quickly revise their listing applications—a move typically seen as a precursor to approval. The SEC must decide by the weekend whether to approve Cboe’s rule changes for VanEck and ARK/21Shares ETFs. While exchange rule changes have clear deadlines, the S-1 review process does not, meaning actual trading could still be months away.
Commodity vs. Security: A Regulatory Turning Point
A critical condition for approval was the exclusion of staking mechanisms in most ETF applications. In its final order, the SEC explicitly stated:
“This order does not involve Ethereum staking by the trusts. Any future activities involving proof-of-stake validation or earning additional ETH would require a new rule filing under 19b-4.”
This distinction is crucial. Since Ethereum’s transition to proof-of-stake (PoS), debate has intensified over whether ETH qualifies as a security under U.S. law. Staking—where users lock up ETH to validate transactions and earn rewards—bears similarities to investment contracts, a key criterion in securities classification.
To navigate this, firms like VanEck, Fidelity, and Grayscale revised their S-1A filings to remove staking provisions. Legal experts interpret this as a de facto acknowledgment by the SEC that non-staked ETH is treated as a commodity, not a security.
Scott Johnsson, financial lawyer and partner at Van Buren Capital, noted that these ETFs are being listed under “commodity-based trust shares” rules—a classification typically reserved for assets like gold or oil.
Jake Chervinsky, Chief Legal Officer at Variant Fund, emphasized the broader implications:
“If the SEC approves a spot Ethereum ETF without staking, it must concede that ETH itself isn’t a security. This would be a historic shift—until now, the SEC has refused to classify any crypto asset besides Bitcoin as a non-security commodity.”
This precedent could reshape ongoing litigation between the SEC and major crypto exchanges. If Ethereum is deemed a commodity, many other tokens may follow under similar logic, potentially weakening the SEC’s enforcement stance across multiple cases.
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Political Winds: The 2025 Election Factor
The timing of this decision is no coincidence. With the 2025 U.S. election cycle underway, crypto has emerged as a key voting bloc. Former President Donald Trump has publicly embraced crypto donations and criticized President Biden’s understanding of digital assets, framing crypto policy as a campaign issue.
In response, the Biden administration may be softening its regulatory posture to avoid alienating tech-savvy voters. Haseeb Qureshi, partner at Dragonfly Capital, suggested that the SEC’s sudden shift reflects broader political strategy:
“The administration may be recalibrating its crypto stance to prevent losing votes over what seems like a niche regulatory issue.”
This softening could signal further pro-industry moves in the coming months—even if not a full policy reversal.
Key Regulatory Developments This Week
Two additional regulatory events highlight Washington’s evolving stance on crypto:
1. FIT 21 Act: A Path Toward Clarity
The Financial Innovation and Technology for the 21st Century Act (FIT 21) passed the U.S. House of Representatives this week. This landmark legislation aims to:
- Clarify jurisdictional boundaries between the SEC and the Commodity Futures Trading Commission (CFTC).
- Establish clear rules for token classification (security vs. commodity).
- Provide legal pathways for blockchain projects to operate compliantly in the U.S.
- Strengthen consumer protections in digital asset markets.
The bill now moves to the Senate. Notably, President Biden has stated he will not veto FIT 21 if it reaches his desk—hinting at executive support.
2. SAB 121: The Custody Accounting Battle
SAB 121, an SEC accounting rule from March 2022, requires firms to record client-held crypto as liabilities on their balance sheets—a burden many argue discourages institutional custody services.
In a rare bipartisan move, Congress passed a resolution to overturn SAB 121—228–182 in the House and 60–38 in the Senate. President Biden must decide by May 28 whether to:
- Veto the resolution,
- Sign it into law, or
- Allow it to become law by inaction.
Despite prior threats to veto, political pressure may push Biden toward approval—especially with Ethereum ETFs now advancing under a commodity framework.
Final Hurdle: The S-1 Review Process
While 19b-4 approvals are essential for listing ETFs on exchanges, the S-1 registration statement is where investor protection truly begins. This document details:
- Fund structure and operations
- Fee schedules
- Custody arrangements
- Risk disclosures
- Audited financials
The SEC’s review of S-1s is notoriously rigorous and can take 60 to 120 days, even after 19b-4 clearance. Delays here mean that while approval is secured in principle, actual trading may still be weeks or months away.
Frequently Asked Questions (FAQ)
Q: What does spot Ethereum ETF approval mean for investors?
A: It allows investors to gain exposure to ETH’s price movements through regulated brokerage accounts—without managing private keys or using crypto exchanges.
Q: Why did the SEC exclude staking from these ETFs?
A: To avoid classifying ETH as a security. Staking introduces yield-generating mechanisms that resemble investment contracts under securities law.
Q: Is Ethereum now officially classified as a commodity?
A: While not formally declared, the SEC’s actions imply that non-staked ETH is being treated as a commodity—setting a powerful regulatory precedent.
Q: How long until Ethereum ETFs start trading?
A: Likely several weeks. The S-1 review process must conclude before any fund can launch.
Q: Could other altcoins get ETFs now?
A: Possibly. If ETH is accepted as a commodity, similar cases for assets like Solana or Cardano may gain traction—but each would require separate evaluation.
Q: What happens if Biden vetoes the SAB 121 repeal?
A: Custody providers may continue avoiding crypto holdings due to balance sheet risks—slowing institutional adoption despite ETF progress.
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