Grayscale Investments, the world’s largest cryptocurrency asset management company, has withdrawn its application for an Ethereum futures ETF with the U.S. Securities and Exchange Commission (SEC) on May 7th.
Although Grayscale did not provide a reason for this decision, it did mention that the SEC had delayed its application multiple times since its initial submission on September 19, 2023. The regulatory body claimed that it needed more time to review the proposal on November 15th, December 18th, and March 22nd of this year.
Grayscale’s move has sparked speculation among experts. James Seyffart, a senior analyst at Bloomberg ETF, believes that the ETF application could be a strategic maneuver. He suggests that Grayscale may be using its Ethereum futures ETF as a “Trojan horse” to create a situation similar to Grayscale’s victory in the GBTC lawsuit, where the approval of futures and spot differed. In August last year, the U.S. Federal Appeals Court sided with Grayscale in a lawsuit against the SEC, accusing the regulatory body of approving Bitcoin futures ETFs while rejecting Bitcoin spot ETFs.
Given this context, Seyffart is puzzled as to why Grayscale is withdrawing now because the SEC must make a decision to approve or reject at least one spot Ethereum ETF application by May 23rd (note: the SEC must decide on VanEck’s application by May 23rd, while the final deadlines for ARK 21Shares and Hashdex are May 24th and May 30th, respectively).
“In my opinion, it would be better to let the SEC approve or reject the ETH futures ETF first and then proceed from there. Perhaps the SEC and Grayscale discussed this matter and convinced Grayscale to voluntarily withdraw? (This is purely speculation),” Seyffart added.
Of course, others speculate that Grayscale may be aiming to increase the chances of approval for its spot ETF. The SEC might choose to approve the Ethereum futures ETF while rejecting the Ethereum spot ETF.
Seyffart does not rule out the possibility of Grayscale resubmitting a modified application, which would reduce the workload for the SEC but also eliminate the opportunity for a lawsuit.
“Withdrawing and resubmitting the application would reduce the workload for the SEC but also mean that Grayscale or anyone else cannot file a lawsuit now.”
Furthermore, in the comments on a tweet, some crypto enthusiasts believe that Grayscale withdrew its application because the SEC will approve the Ethereum spot ETF. Seyffart does not think this is the case.
“I don’t think that scenario will happen (although the possibility is not zero), so I believe it’s because of something else. However, if I were Grayscale, this would indeed be one of the very few reasons I would voluntarily withdraw this application.”
It is worth noting that SEC Chairman Gary Gensler stated in an interview with CNBC on May 7th that the SEC is still weighing its decision on the Ethereum spot ETF and reiterated concerns about fraud in the crypto market.
“As for the Ethereum spot ETF, this is one of the issues our commission is currently facing. We are a committee of five members, and these filings will be addressed at the appropriate time.”
Recently, analysts including JPMorgan, Standard Chartered, and Bloomberg have all expressed doubts about the likelihood of approval for a spot Ethereum ETF in May. Grayscale’s withdrawal of its application further decreases the possibility of an Ethereum spot ETF being approved this month.