The SEC has initiated a comment period for Grayscale, Fidelity, and Bitwise's applications to launch spot Ethereum exchange-traded funds (ETFs). This pertains to proposed rule changes by two exchanges, Cboe BZX and NYSE Arca, intending to list and trade shares of the three funds. Comments will remain open for 21 days following publication in the federal register, a standard procedure mirroring past spot Bitcoin ETF applications, which sought feedback from US citizens and organizations.

The notices delve into various factors expected to influence the SEC's decision on the proposed spot Ethereum ETFs. Of particular significance are discussions on the correlation between ETH futures and spot markets and whether the spot ETH market holds significant size relative to the futures ETH market, a factor previously considered in approving futures ETH ETFs.

NYSE Arca and Grayscale referenced an analysis by Coinbase illustrating the correlation and suggesting minimal likelihood of fraud and manipulation in the spot ETH market. Additionally, they argued that the Investment Company Act of 1940 lacks relevant protections that would justify denying certain spot crypto ETFs, contrary to the SEC's stance. Similarly, Cboe and Fidelity asserted that their proposal and analysis demonstrate the relevance of the spot ETH market size, while NYSE Arca and Bitwise provided their own analysis to support this claim.

The notices also invite comments on other aspects such as fund custodianship, creation and redemption models, and sponsor's fees. However, it's important to note that requests for comments are standard practice and do not necessarily indicate the likelihood of a fund gaining approval.

This call for comments follows a series of delayed decisions by the SEC regarding spot Ethereum ETFs. The participation of prominent fund managers like Grayscale, Fidelity, and Bitwise underscores the growing interest and significance of cryptocurrency-based financial products among traditional investment firms. These firms aim to establish spot ETH ETFs, allowing investors to purchase shares reflecting Ethereum's price, following the SEC's approval of 11 Bitcoin ETFs in January. Despite differing market sentiments, with some speculating on potential SEC delays, entities like Standard Chartered express optimism, foreseeing SEC approval by May.