Grayscale’s Ethereum Futures ETF Exit Stirs Speculation

Grayscale’s withdrawal of its Ethereum futures ETF application befuddles investors and sparks speculation.
Industry analysts suggest the move might be a tactical shift in strategy amid evolving SEC dynamics.
Grayscale’s retraction comes amidst heightened anticipation for SEC decisions on Ethereum ETFs.

Grayscale Investments, a significant force in the global management of cryptocurrency assets, sparked attention by retracting its application for an Ethereum futures ETF filed via Form 19b-4. This surprising decision unfolded just three weeks before the anticipated ruling by the US Securities and Exchange Commission (SEC).

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The reasons behind this withdrawal remain undisclosed. Both NYSE Arca and Grayscale have refrained from commenting, despite inquiries from The Block team. Grayscale’s move to pull back its Ethereum futures ETF application introduces further intricacy to the quest for obtaining a spot ETF listing in the United States.

This decision comes in the wake of Grayscale’s recent legal triumph against the SEC concerning a Bitcoin spot ETF. Initially submitted on September 19, 2023, the 19b-4 application sought to establish ETF futures for potential listing on the New York Stock Exchange pending approval. Confidence in SEC approval for such offerings has waned in recent months.

Bloomberg ETF analyst James Seyffart initially believed that Grayscale planned to use the Ether futures ETF strategically as a move to corner the SEC into approving its spot Ether ETF. According to Seyffart, this move could be a tactic to protect their main goal, namely the application for an Ethereum ETF. He thinks the SEC may allow futures ETFs to be established to meet investor demand for Ethereum exposure, while spot ETFs may be rejected.

Meanwhile, for several months, Seyffart and fellow Bloomberg ETF analyst Eric Balchunas have downplayed their estimates of the chances of a spot ETH ETF being approved. Initially, it was 70% in January to just 25% on May 23. This is partly based on the different treatment of spot ETH ETFs from spot Bitcoin ETFs which were approved earlier in early 2024.

Most recently, Gary Gensler, Chairman of the United States SEC, hinted that the SEC is still deliberating its stance on the Ether ETF. The SEC has notably deferred its decision on Ethereum ETFs, including the Invesco Galaxy Ethereum ETF, until July 5th. The SEC will still decide on VanEck’s application on May 23, while ARK 21Shares and Hashdex have final deadlines on May 24 and May 30.

However, many industry experts predict the securities regulator will make decisions about all or most applicants in the same way it did with Bitcoin spot ETFs in January.

Grayscale’s unexpected withdrawal of its Ethereum futures ETF application contributes to the growing ambiguity within the crypto market. This action may influence the fate of an Ethereum spot ETF approval and prompt speculation regarding Grayscale’s approach to navigating SEC regulations.