Grayscale Investments recently made a bold move by submitting an application for an Ether (ETH) futures exchange-traded fund (ETF) to the United States Securities and Exchange Commission (SEC). However, the move is being viewed as a strategic move to persuade the SEC to approve its spot Ether ETF. Bloomberg ETF analyst James Seyffart, in a recent Twitter post, suggested that the Ether futures ETF application is a “trojan horse” that Grayscale is using to pressure the SEC into approving its spot Ether ETF application. He believes that by approving the futures ETF application, the SEC would be compelled to approve the spot Ether ETF as well.
Seyffart’s comments come in the wake of the SEC’s decision to delay the approval of Grayscale’s Ether futures ETF. In his tweet, he expressed his expectation that Grayscale could use the SEC’s decision to either approve or deny the futures ETF application to their advantage. If the SEC approves the futures ETF, Grayscale could argue for the approval of its spot Ether ETF application. On the other hand, if the SEC denies the futures ETF, Grayscale could argue that the SEC is treating Bitcoin (BTC) and Ether futures ETFs differently by allowing one to be approved under the Securities Act of 1933 but not the other.
Seyffart also noted the unusual nature of the application process, highlighting that Grayscale’s Ether futures ETF bid was submitted through form 19b-4, a process that none of the 40 or so approved Ether ETF products had undergone. This has led Seyffart to believe that Grayscale is intentionally using this process to create a challenging situation for the SEC, essentially cornering them into a lose-lose situation.
The delay in the SEC’s decision on Grayscale’s Ether futures ETF also coincided with a similar postponement of Hashdex’s application to convert its Bitcoin futures ETF into a spot product. This suggests a broader trend in the SEC’s approach to ETF applications for different types of cryptocurrencies. BlackRock has also joined the conversation, arguing that the SEC does not have a valid reason to treat cryptocurrency spot and futures ETF applications differently.
The general sentiment in the market is that Grayscale may not actually intend to launch the Ether futures ETF, with Scott Johnsson, General President at Van Buren Capital General, expressing doubts about the product ever trading. Instead, the Ether futures ETF is seen as a strategic vessel to help Grayscale obtain approval for its spot Ether ETF.
In the broader context, the ongoing debate and maneuvering by crypto asset managers and the SEC illustrate the complexities and challenges involved in bringing crypto ETFs to market. The evolving regulatory landscape and the competitive dynamics between different ETF products underscore the need for a balanced and well-informed approach to the regulation and approval of cryptocurrency investment products. As the industry continues to grow and mature, finding common ground between crypto asset managers and regulatory authorities will be key to establishing a solid framework for cryptocurrency ETFs. This will ultimately benefit investors and contribute to the continued development and mainstream adoption of digital assets.