Grayscale suspends applications for Ethereum futures ETF

Grayscale, a leading cryptocurrency asset manager, is changing its rules for the Securities and Exchange Commission (SEC) for its Ethereum futures exchange-traded fund (ETF), citing multiple delays from federal regulators since its initial filing in September 2023. I withdrew my application.

The withdrawal notice filed Tuesday did not provide specific reasons for Grayscale’s decision to abandon plans for the Grayscale Ethereum Futures Trust ETF. The SEC has postponed its review of the proposal several times, most recently on March 22, after previously extending the review period on November 15 and December 18.

Bloomberg analyst James Seyffart described the move as “interesting” and said the filing was “essentially a Trojan case” designed to create a situation similar to Grayscale’s successful lawsuit against the SEC over Bitcoin Trust (GBTC). “It was a wooden horse,” he suggested.

Update This is interesting. @Grayscale I just withdrew my 19b-4 application. #Ethereum Futures ETFs. In my opinion, this was essentially a Trojan horse filing to create the same situation that would have allowed Grayscale to win. $GBTC Litigation (point of refusal to accept gift) pic.twitter.com/Kihj2dlQx1

— James Seyff (@JSeyff) May 7, 2024

Last August, a federal appeals court sided with Grayscale after the company criticized the company for approving a Bitcoin futures ETF while rejecting a Bitcoin spot ETF.

Seyffart speculated that Grayscale wanted the SEC to again “approve futures and reject spot,” potentially setting off another legal showdown. However, he noted that the withdrawal could be a sign that Grayscale is not filing suit at this time.

But Seffart, in particular, did not dismiss the possibility of Grayscale resubmitting a revised application. This may save the SEC work, but it also eliminates the opportunity for litigation.

The move comes amid growing skepticism about the SEC’s willingness to approve an Ethereum spot ETF, despite the agency approving a Bitcoin spot ETF in January, which has sparked a bull market for the top cryptocurrency.

The likelihood of approval for an Ethereum spot ETF continues to decline, further reduced by the recent revelation that the SEC classified Ethereum as a regulated security last year, contrary to public statements that no decision has been made.