Grayscale did not explain its reasons in the takedown notice.

On May 7, Grayscale withdrew its application for an Ethereum futures ETF before the US SEC. The main crypto asset manager did not explain the reasons for its decision in the takedown notice.

Since November 2023, the application had faced several delays from the federal regulator, which argued it needed more time for analysis.

According to Bloomberg ETF analyst James Seyffart, Grayscale’s withdrawal appears to be an interesting strategy by the company. He suggested that Grayscale was seeking to replicate the conditions that favored it in a previous court case against the SEC, from which it emerged victorious last August.

“UPDATE This is interesting. @Grayscale just withdrew their 19b-4 filing for an #Ethereum futures ETF. This was essentially a Trojan horse filing in my view, in order to create the same circumstances that allowed Grayscale to win the $GBTC lawsuit (approve futures deny spot),” Seyffart posted on X on May 7.

Grayscale had been waiting nine months for a verdict from the SEC, after it filed the request in August last year. On that occasion, the companies VanEck, Bitwise, Roundhill, ProShares, Valkyrie, Kelly and VolShares also requested authorization.

While with Grayscale the process was delayed several times, the ETFs of the other companies mentioned were approved in October 2023,

Grayscale’s Decision Further Details

Seyffart believes the company intended to spark another legal showdown with the SEC by seeking similar approval for Ethereum ETFs. However, he noted that the withdrawal of the order may indicate a different approach than Grayscale this time.

Seyffart expressed his bewilderment at Grayscale’s decision, wondering if this could cause the SEC to draft an approval or denial for an ETH futures ETF. Another option he puts on the table is that perhaps the SEC spoke to Grayscale about this and everything that was said convinced Grayscale to walk away. Everything said by Seyffart, although, as he himself says, is an assumption.

The comments were joined by Fox Business journalist Eleanor Terrett, who mentioned that one of the factors to take into account is that Grayscale did not present the S-1 form, one of those required for final approval, in its application.

“The SEC may have wanted to see if a finished futures application would come before considering its spot application,” she said. This considering that investor demand for existing ether futures ETFs “has been relatively weak” since their launch last year, she added.

Seyffart did not rule out the possibility of Grayscale resubmitting a modified version of the order. He stressed that remaking the order would be less burdensome for the SEC, but would preclude any immediate legal action by Grayscale or other interested parties.

The decision to withdraw the application also coincides with growing uncertainty over the SEC’s potential clearance of Ethereum spot ETFs. While Bitcoin spot ETFs were approved in January, the approval odds for Ethereum ETFs have been declining, especially after reports that the SEC classified Ethereum as a regulated security last year.

Another ETF specialist, Nate Geraci, believes that Grayscale should stick with its proposal, as it would have given it reason to “file a lawsuit simply based on the denial of this futures-based ETF.”

Getting an SEC ruling on the futures ETF “could have been instrumental in any lawsuit filed by Grayscale,” if the ether spot ETF was rejected, Geraci says.

By Audy Castaneda


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