Analyzing the Path to Approval for the Ethereum ETF with Finance Specialist Scott Johnsson

Ethereum enthusiasts and investors are eagerly awaiting the potential approval of a spot Ethereum ETF. Scott Johnsson, a finance lawyer and the General Partner and General Counsel at Van Buren, has provided a comprehensive analysis titled “The Road Ahead: A ETH Spot” in a series of Twitter threads.

Part 1 – General Roadmap
Johnsson outlines a four-step roadmap for approving a spot ETF, drawing parallels to the successful journey of Bitcoin ETFs. The process involves obtaining a DCM Futures Listing, progressing through ’40 Act Futures ETF, ’33 Act Futures ETF, and finally achieving the coveted spot approval. The analysis begins with a historical BTC spot ETF approval timeline, highlighting crucial milestones such as the CME Bitcoin Commodity Futures Listing in December 2017 and the recent spot ETF approval in January 2024. Johnsson emphasizes the significance of a DCM Futures Listing as a prerequisite for any spot ETF.

Part 2 – Threshold Issue & Grayscale
In Part II, Johnsson addresses Section 6(b)(5) of the Exchange Act, which is a roadblock for BTC and potential ETH spot ETFs. He delves into the impact of the Grayscale ruling on the SEC’s approach, mainly focusing on the “significant size” test and Surveillance Sharing Agreement (SSA).

Part 3 – BTC 19b-4 Approval Order
The third part explores in detail the SEC’s approval order for BTC spot ETFs, unraveling the reasoning behind addressing the concern of “potential fraud and manipulation” outlined in Section 6(b)(5). Johnsson analyzes five key points from the order, highlighting the SEC’s sidestepping of the “significant size” test.

Part 4 – ETH Analysis
Moving to Part IV, Johnsson applies the insights from BTC to speculate on the potential approval of an ETH spot ETF. He points out the optimistic perspective, emphasizing the SEC’s expressed correlation-based rule for approval. However, he cautions about potential headwinds and the impact of ongoing regulatory actions against platforms like Coinbase and Binance.

In response to a follower’s question about the estimated timeline for spot ETH ETF approval, Johnsson suggests another year, maybe two, anticipating the need for the early period of the ETH futures market to roll off from the sample period.

In conclusion, Scott Johnsson’s detailed analysis provides a comprehensive roadmap to understand the approval process for a spot Ethereum ETF. His detailed breakdown helps shed light on each step of the regulatory approval process that tends to repeat itself.