Ethereum (CRYPTO: ETH) proponents might still be optimistic about a spot ETF approval but analysts tracking the developments increased the odds of a rejection by the SEC.

What Happened: Analyzing a March filing submitted by BlackRock Inc. to the SEC over its ETF application, finance lawyer Scott Johnson discovered "official" signals of the regulator viewing Ethereum as a security.

The SEC while delaying the approval, also sought public feedback on whether the applicant properly filed its ETF listing proposal as a commodity.

Johnson noted that this question was asked for all the ETF filings and never for any Bitcoin (CRYPTO: BTC) spot/futures ETF product.

"The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security," he added.

Responding to his findings, Bloomberg analyst James Seyffart increased the likelihood of a spot ETH ETF rejection, convinced that the regulator was considering the security question for ETH.

Bloomberg ETF analyst Eric Balchunas entered the discussion as well, emphasizing, "Our odds of approval remain the same: slim to none."

Why It Matters: The SEC is due to decide on VanEck's spot Ether ETF by May 23 – the final deadline for the first batch of proposals enabling investors to bet on the spot price of the world's second-largest cryptocurrency.

Ethereum's status has become the major sticking point, with the SEC allegedly launching a covert operation to brand the cryptocurrency as a security. A rejection might pose further pain for the asset, already hampered by a sluggish market in recent weeks.

Price Action: At the time of writing, ETH was exchanging hands at $2,888.08, following a 2.16% drop in the last 24 hours, according to data from Benzinga Pro.