April 25 (Reuters) - U.S. issuers and other firms expect

the Securities and Exchange Commission to deny their

applications to launch exchange-traded funds (ETFs) tied to the

price of ether after discouraging meetings with the agency in

recent weeks, four people said.

VanEck, ARK Investment Management and seven other

issuers have filed with the SEC to list ETFs that would track

the spot price of the world's second-largest cryptocurrency

after bitcoin. The SEC must decide on VanEck's and ARK's

filings, which are first in line, by May 23 and May 24

respectively.

Recent meetings between issuers and the SEC have been

one-sided and agency staff have not discussed substantive

details about the proposed products, said four people who

participated.

That is in contrast to the intensive and detailed

discussions between issuers and the agency in the weeks before

its landmark approval of spot bitcoin ETFs in January, said the

people who declined to be identified because the talks are

private.

The agency, which is led by crypto skeptic Gary Gensler,

rejected spot bitcoin ETFs for more than a decade over market

manipulation worries but was forced to approve them after

Grayscale Investments won a court challenge.

Issuers argued in the meetings that those ETFs and ether

futures-based ETFs the SEC approved in October set a precedent

for the spot ether products, and have tried to address potential

regulatory concerns, the people said. SEC staff listened but did

not spell out specific concerns or generally ask questions,

suggesting the agency will deny the filings, they added.

That would be a setback for the crypto industry which had

hoped spot bitcoin ETFs would pave the way for other similar

products and push cryptocurrencies into the mainstream.

"It seems more likely that approval will be delayed until

later in 2024, or longer," said Todd Rosenbluth, head of ETF

analysis at data firm VettaFi, who is tracking the issue

closely. "The regulatory picture still seems cloudy."

Some issuers said they still plan to file additional

disclosure paperwork with the SEC to keep the conversation

going.

A SEC spokesperson said it does not comment on individual

filings. VanEck CEO Jan van Eck told CNBC this month the firm's

application would "probably be rejected."

ARK did not return requests for comment. When asked by

Reuters at an event this week about its ether application, ARK

CEO Cathie Wood said only that ether could become a major asset

class.

An expected thumbs-down is reflected in ether's price, said

Hong Fang, president of crypto exchange OKX. While the

cryptocurrency is up 39% this year, it has struggled to keep

pace with bitcoin, which is up more than 51% and scaled new

peaks last month.

"There's more downward pressure on prices as people build

that expectation in," said Fang.

'MORE DATA'

The SEC has held just a handful of meetings on the ether

products so far, according to the sources and SEC records.

The only meeting disclosed by the regulator was last

month with crypto exchange Coinbase. It related to

Grayscale's application to convert its Ethereum Trust

into an ETF, for which Coinbase is the custodian.

The SEC approved spot bitcoin ETFs on the basis that

existing market surveillance mechanisms for bitcoin futures

ETFs, which it approved in 2021, were good enough for spot ETFs

too.

Coinbase argued that the same rationale applies to the spot

ether products, since ether futures and the spot market are

highly correlated, according to the SEC disclosure.

If the SEC does reject ether ETFs, several applicants expect

it to do so due to broad issues, such as the nature and depth of

statistical data on the underlying ether market.

The agency may argue it has had limited time to observe

ether futures, said Matt Hougan, chief investment officer at

Bitwise Asset Management, which has filed for a spot ether ETF.

"I think that would be the mechanical reason why it would

get pushed out is they just want to see more data."

Some say rejection could invite another lawsuit.

"It's entirely possible we'll eventually see ether ETFs,"

said one of the sources. "But not until somebody is denied and

goes to the courts."