In a letter, two US senators urged the SEC to tighten regulations on Bitcoin ETFs and to reject applications for new crypto ETFs. Coinbase Chief Legal Officer Paul Grewal responded angrily to this letter.

Grewal attacked the senator in a post on March 15 to X, citing his March 11 letter in which he stated that approving further cryptocurrency ETFs beyond Bitcoin would subject investors to "enormous risks."

With due respect, Senators, the data clearly indicates otherwise, Grewal retorted.

Grewal explained that the market for many cryptocurrencies smaller than Bitcoin, notably Ether (ETH), demonstrated quality metrics that “exceed even the largest traded equities.”

“ETH’s spot market is deep and liquid– only two S&P 500 stocks have higher notional dollar trading volume,” added Grewal.

Grewal added there was direct evidence that Ether’s futures and spot markets were just as correlated as Bitcoin’s. “When compared to Bitcoin, ETH’s future and spot market demonstrate EXACTLY the same type of high and consistent correlation that would enable market surveillance.”

In a meeting with SEC officials on March 9, Coinbase and cryptocurrency asset management Grayscale discussed a rule change for the introduction of spot Ether ETFs. Coinbase contended that since the SEC had allowed Bitcoin ETFs, they ought to have approved Ether ETFs as well.

According to some observers, Grayscale might be using their application for a futures ETF as a "trojan horse" to pressure the SEC into approving its spot Ether ETF.

A number of industry observers, such as Bloomberg ETF analyst Eric Balchunas and general partner Scott Johnson of VB Capital, have projected that the SEC intends to reject the proposed ETH ETFs based on "correlation," or the discrepancy between spot and futures prices.

Nate Geraci, the president of the ETF Store said it was clear that Coinbase was now “going all in” on supporting spot Ether ETFs, hinting that conflict between the crypto exchange and the regulator could soon escalate ahead of the May 23 deadline for an ETH ETF decision.

“None of this is about ‘protecting investors’ It’s all about politics. Sad. It’s all sour grapes b/c investors want exposure to spot btc ETFs,” Geraci said in a follow-up post.

Senators Jack Reed and Laphonza Butler, both Democrats, wrote a letter to SEC Chair Gary Gensler on March 11 claiming that approving any more crypto ETFs would expose investors to dangers arising from "thinly traded" markets that are plagued with manipulation and fraud.

Additionally, Reed and Butler stated that the markets for cryptocurrencies smaller than Bitcoin were "far more exposed to misconduct" in addition to a number of calls for stricter regulatory monitoring of Bitcoin ETFs.

There have been expectations that additional altcoins may eventually follow in the footsteps of the eight proposed spot Ether ETF applications that are presently pending SEC approval.