Senators pressure SEC Gensler not to approve any more crypto ETFs

Two US senators want Gary Gensler to pull the plug on any more crypto exchange-traded funds (ETFs), citing “huge concerns” for retail investors.

In a March 11 letter, Democrat Senators Jack Reid and Lafonza Butler said the Securities and Exchange Commission's approval of any additional crypto ETF approvals would expose investors to “thinly traded” markets full of fraud and deception.

There are eight proposed Ether ETF applications awaiting SEC approval, and there have been hopes that other altcoins may eventually follow suit.

“Retail investors are particularly at risk from ETPs that are vulnerable to pump and dump or other fraudulent practices.”

Reed and Butler also stressed that the SEC's recent approval of spot Bitcoin (BTC) ETFs should not be a condition for future approvals.

While the bitcoin market is showing “severe weakness,” it is more established and well-researched than the market for other smaller cryptocurrencies, he said.

“But Bitcoin can be vulnerable to fraud and fraud, the markets of other cryptocurrencies are more prone to misconduct.”

The senators also urged the SEC to take “a number of specific actions” with the already launched Bitcoin ETF products, calling for more regulatory oversight of BTC ETF brokers and advisors.

Alexander Grieve, head of government relations at crypto venture capital firm Paradigm, pointed out that the success of the spot Bitcoin ETFs was “clearly ruffling some feathers” on Capital Hill.

Related: Bitcoin price hits new $73.6K all-time high as ETFs eat into supply

Crypto industry analysts say the letter is evidence of growing political pressure on Gensler — making the Ether ETF approval in May less likely.

“Bitcoin ETF Is Enraging Top Dems With Blockbuster Success. Buyer's remorse. This is part of why we are pessimistic and we look at the possibilities of Eth etf approval,” Balchunas said in a March 15 X post.

On March 11, Balchunas said the chances of Ether ETF approval in May sit at just 35 percent. In January, Blachunas stated the probability of approval at 70%, but told Cointelegraph that the SEC's “radio silence” is a bad sign for funders – among many reasons.

Both Butler and Reed have been involved in several pieces of legislation seeking to curb cryptocurrency in the United States.

On December 11 last year, Butler joined Senator Elizabeth Warren's controversial Digital Asset Anti-Money Laundering Act as a co-sponsor. In July, Reid sponsored a bipartisan bill that would strengthen Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations and decentralized finance (DeFi) ban requirements.

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