Leading cryptocurrency asset manager Grayscale has abandoned plans to offer an exchange-traded fund (ETF) for Ethereum futures, withdrawing its rule change application with the Securities and Exchange Commission (SEC) on Tuesday.
The withdrawal notice for the proposed ETF, Grayscale Ethereum Futures Trust, does not specify why Grayscale changed its plans, but points to multiple delays cited by the SEC since the first filing on 19 September 2023. The federal regulator said it would need more time to review the proposal on 15 November, 18 December and finally 22 March this year.
James Seyffart, ETF analyst for Bloomberg, called the move a "Trojan horse" in his view, to create the same circumstances that allowed Grayscale to win the GBTC case. "Grayscale probably wanted the SEC to approve futures again, while denying the spot, which would have set the stage for another legal confrontation," he said.
A federal appeals court ruled in favour of Grayscale in its case against the SEC in August, after the firm criticised the agency for previously approving Bitcoin futures ETFs-allowing traditional investors to buy shares that track the anticipated value of the digital asset-while rejecting Bitcoin spot ETFs, which are linked to the current price of BTC.
It is possible that Grayscale withdrew its application for Ethereum futures ETFs in order to file an amended application, Seyffart acknowledged. "Withdrawing and refiling requires less work for the SEC, but it also means there is no opportunity for Grayscale or anyone else to sue now," he observed.
When a commenter on Twitter suggested that Grayscale had withdrawn its application because the SEC was going to approve Ethereum spot ETFs, Seyffart scoffed at the idea. "I don't think that's going to happen (although the chances aren't zero), so I think it was something else," he wrote. "That said, honestly, this is one of the very few reasons I would voluntarily withdraw this if I were Grayscale."
Indeed, the move comes amid growing scepticism that the SEC will allow the creation of Ethereum spot ETFs, which were once a promising prospect after the agency allowed the sale of Bitcoin spot ETFs in January. The launch of Bitcoin spot ETFs triggered a price spike for the leading cryptocurrency, credited with helping it reach a new record price in March.
The chances of approval for an Ethereum spot ETF continue to fall, with hopes recently dampened by the revelation that the SEC had classified Ethereum as a regulated security last year, despite public statements that no decision had been made.
