Senators Jack Reed and Laphonza Butler, both Democrats, urged Gensler to restrict the expansion of the crypto-spot ETF market, saying,

“We believe the SEC should strictly limit the precedential application of these approvals. While the bitcoin market has displayed serious weakness, it is nonetheless far more established and scrutinized than the market for any other cryptocurrency. However, vulnerable bitcoin may be to fraud and manipulation, markets for other cryptocurrencies are far more exposed to misconduct.”

The Senators further raised concerns about market surveillance and emphasized the importance of safeguarding retail investors from thinly traded cryptocurrencies and those vulnerable to pump-and-dump schemes.

Uncertainty about the SEC approving the ETH-spot ETF applications intensified in recent weeks. Hopes of an XRP-spot ETF market have also faded. The letter to Chair Gensler could further impact investor hopes of an XRP-spot ETF approval.

SEC intentions to appeal the ruling on the Programmatic Sales of XRP would justify the inclination to reject altcoin ETF applications. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test.

Spot ETF issuers are unlikely to submit XRP-spot ETF applications until the end of the appeals process. The ongoing SEC v Ripple case is in its final stages. Judge Torres could deliver a summer ruling on the Penalty for breaching Section 5 of the 1933 Securities Act. Crypto experts believe an appeal against the Programmatic Sales ruling could extend the case into 2025.