Crypto ETFs face potential drawback as senators tell SEC Gary Gensler not to give any more greenlight

Crypto ETFs could slow down on their success after democrat senators Jack Reed and Laphonza Butler sent a detailed letter to the US Security and Exchange Commission (SEC) chairman, Gary Gensler, asking him not to give any further approval.

Crypto ETFs approval is a wrong move, senators say

Crypto ETFs tracking the price of Bitcoin (BTC) debuted in the US in January, a move that sparked a bull run in the crypto market. The SEC's Bitcoin ETF approval allowed several reputable investment institutions, including BlackRock, Fidelity, and Ark21Shares, among many others, to give customers access to the most popular digital asset.

Less than two months after their launch, these ETFs have been one of the main catalysts for Bitcoin's price, sending it to a fresh all-time high of $73,600 on Thursday.

However, Jack Reed and Laphonza Butler said the SEC made the wrong move by greenlighting crypto ETFs. In a letter dated March 11, they stated several reasons why crypto ETFs pose a threat to the financial well-being of retail investors.

Furthermore, they accused brokers of violating fair disclosure rules by intentionally obscuring important information and employing "naming and marketing that appear to obfuscate important characteristics about these investments." 

Also read: Cetera proclaims ‘prudent embrace’ of spot BTC ETF usage, expert says more to come

Spot Ether ETFs approval has slim chances

This letter comes at a time when eight spot Ether (ETH) ETFs from reputable firms like BlackRock, Franklin Templeton, VanEck, etc., await a decision from the SEC later in May.

In a post on X, ETF analyst Eric Balchunas stated the success of Bitcoin ETF is upsetting high-ranking Democrats, leading to a pessimistic view of a spot ETH ETF approval chances.

The senators also mentioned that the SEC should slow down in approving any other crypto ETFs."While the bitcoin market has displayed serious weakness, it is nonetheless far more established and scrutinized than the market for any other cryptocurrency," they said.

Reed and Butler expressed concerns that ETPs representing cryptocurrencies with low trading volume will expose retail investors to high risks.

The market has yet to respond to this news as institutional brokers or the SEC haven't commented on the letter as of the time of writing.

Read more: Ethereum price trades above $4,000 while anti-Ether political campaigns downplay spot ETH ETF