Bloomberg ETF analysts James Seyffart and Eric Balchunas are confident that the U.S. Securities and Exchange Commission (SEC) will approve spot Litecoin exchange-traded funds (ETFs) by the end of 2025. The SEC’s approval of spot ETF applications for Litecoin indicates a higher chance of approval compared to XRP, Solana, and Dogecoin, with probabilities of 65%, 70%, and 75% respectively.
Litecoin, which was developed in 2011 as a faster alternative to Bitcoin, operates on a proof-of-work mechanism similar to Bitcoin’s authentication system. The regulatory pathway for Litecoin is more favorable as the SEC categorizes it as a commodity. Regulatory documents S-1 and 19b-4 have been submitted to support the SEC’s evaluation of Litecoin.
According to the consultants, Litecoin ETFs are expected to generate less market interest compared to Bitcoin or Ether ETFs. However, even with an initial capital total below $50 million, fund issuers would consider a Litecoin ETF valuable. Bitcoin and Ether ETFs have gained significant market inflows, totaling more than $43.88 billion from January to July 2024.
The SEC is expected to make a decision on the ETF applications for Litecoin, Solana, XRP, and Dogecoin between October 2 and October 18. The regulatory environment seems supportive of approving a Litecoin ETF before the deadline.
XRP and Solana face ongoing regulatory challenges for their proposed ETFs. The classification of XRP as a security is still unresolved, as the SEC has appealed a court ruling that classified XRP sold on secondary markets as a security. The SEC, under acting Chair Mark Uyeda, is now overseeing the case initiated by former Chair Gary Gensler, which brings hope for a possible dismissal of the enforcement action. Solana’s classification also needs clarification, preventing the SEC from evaluating it based on commodities ETF assessment methods. The approval process for XRP and Solana ETFs remains uncertain due to unresolved classification issues.
Market analysts anticipate that U.S.-based ETF issuers will submit more cryptocurrency-focused ETF proposals in the coming months. The strategy is to test various proposals to determine which ones are successful. However, the chances of approval for crypto ETFs other than Litecoin are predicted to be low, not exceeding 5% before the 2024 political changes.
Financial firms Canary Capital and 21Shares have submitted ETF applications for Hedera and Polkadot assets. The approval odds for these filings are currently unavailable. As regulatory guidelines continue to adapt, progress in the crypto ETF sector is anticipated.