Grayscale Withdraws ETH Futures ETF Application

Grayscale has withdrawn its Ethereum futures ETF application. The withdrawal took place two weeks after the legal deadline for the SEC to finalize a decision about at least one of the spot Ethereum ETF applications.

Grayscale has withdrawn a 19b-4 application that was filed for a Ethereum Futures ETF after three weeks before the official finalization deadline for the SEC to issue a ruling.

The asset management firm has filed a withdrawal notice for Grayscale Ethereum Futures Trust with the Securities and Exchange Commission on 7th May 2024. The SEC was legally obligated to issue a decision regarding the approval or rejection of Ethereum futures ETF by the end of the ongoing month.

Grayscale’s 19b-4 Application

Grayscale filed for the 19b-4 application on 19th September last year. If approved the investment product would have been listed at a New York Stock Exchange.

James Seyffart, a Bloomberg ETF analyst, noticed that Grayscale has developed a strategic plan to utilize the Ethereum Futures ETF as a ‘Trojan Horse’ as a way to corner SEC into approving a spot Ethereum ETF filed by the same firm.

He further stated that he has remained confused about why Grayscale has decided to make a withdrawal so close to the deadline. SEC is bound to make a ruling for rejecting or accepting one out of all spot Ethereum ETF applications by 23rd May.

Chances of Grayscale’s ETF Application Approvals

Bloomberg analysts Seyffart and Balchunas have projected a 25% chance for approval of the spot Ethereum ETFs on 23rd May 2024. This projection is down from 70% odds of listing in comparison to the projections issued in the first month of 2024.

The decision to make a withdrawal by Grayscale is not impacted by these projections. However, Seyffart has noted that at present there is no way for Grayscale to bring a lawsuit against SEC if the agency decides to decline its application.

Gary Gensler, SEC chairperson made a comment on 7th May speaking with CNBC noting that SEC is still working on reaching a decision regarding the approval of spot Ethereum ETF applications by the firm. He stated that there are some tasks ahead of the commission.

The agency is a five-member commission and the filings from Grayscale are going to get approval at a suitable timing.

However, the SEC is also legally bound to reach a decision regarding the ETF applications filed by VanEck on 23 March. The same deadline for Ark 21Shares and Hashdex falls on 24th May and the end of the month simultaneously.

In the same manner, the final ruling date for firms that have filed an ETF application including Invesco Galaxy, BlackRock, Fidelity, and Grayscale lined up in July, August, and June. The analysts have predicted that the security regulator will approve all or most of these applications in the same manner as spot Bitcoin ETFs in January 2024.

Ark and 21Shares Remove Staking Plans from Ethereum ETF Application

Analyst Eric Balchunas claims that updates on Ethereum ETF applications are a response to feedback from the SEC and without any comments.

On this account, Ark Invest and 21Shares have removed staking plans from their spot Ethereum ETF applications. The updated filings were sent to the SEC on 10th May.

The Ethereum spot ETF application was inclusive of a clause noting that 21Sahres will stake a portion of fund’s assets through third-party service providers. However, after the update this clause was removed. The updated filing denotes that sponsors reserve the right to stake a portion of Trust’s asset through one or more trusted staking services.

In their 7th February filing, the firms included another amendment that postulated that 21Shares is expecting to receive ETH as a reward for staking and will mark the subsequent earnings as income generated from the fund.

However, these filings have removed this section after the recent update and maintained broader guidelines such as losses from temporary inaccessibility of funds during bonding and unbonding and impact on the price of Ethereum.