Grayscale pulls out of its Ethereum futures ETF app

Grayscale, a major crypto asset manager, has withdrawn its rule change request to the Securities and Exchange Commission (SEC) for an ethereum futures exchange-traded fund (ETF), citing multiple delays by the federal regulator since filing initial in September 2023.

The withdrawal notice, filed on Tuesday, did not provide specific reasons for Grayscale's decision to abandon its plan for the Grayscale ethereum Futures Trust ETF. The SEC had invoked several delays in reviewing the proposal, 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,” suggesting that the filing was “essentially a Trojan horse” designed to create circumstances similar to Grayscale's successful lawsuit against the SEC over its bitcoin trust (GBTC).

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UPDATE This is interesting. twitter.com/Grayscale?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>@Grayscale just withdrew its 19b-4 application for a twitter.com/hashtag/ethereum?src=hash&ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>#ethereum Futures ETFs. In my opinion, this was essentially a Trojan horse file, in order to create the same circumstances that allowed Grayscale to win the twitter.com/search?q=%24GBTC&src=ctag&ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>$GBTC demand (approve futures deny spot) pic.twitter.com/Kihj2dlQx1

-James Seyffart (@JSeyff) twitter.com/JSeyff/status/1787951570711163123?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener noreferrer”>May 7, 2024

In August, a federal appeals court sided with Grayscale after the company accused the agency of approving bitcoin futures ETFs and denying bitcoin spot ETFs.

Seyffart speculates that Grayscale wanted the SEC to “approve futures, deny spot” again, which could lead to another legal showdown. However, he noted that the withdrawal could be a sign that Grayscale will not file a lawsuit this time.

It's worth noting, however, that Seffart did not rule out the possibility of Grayscale resubmitting an amended application, which would mean less work for the SEC but eliminate the opportunity to file a lawsuit.

The move comes amid growing skepticism about the SEC's willingness to authorize ethereum spot ETFs, despite the agency's approval of bitcoin spot ETFs in January, which sparked a race bullish for the main cryptocurrency.

The approval odds for ethereum spot ETFs have continued to decline, further diminished by recent revelations that the SEC allegedly classified ethereum as a regulated security last year, contrary to public statements indicating that it had not been taken no decision.