Grayscale Withdraws ETH Futures ETF Application, Abandons "Approve Futures, Deny Spot" Strategy
Grayscale has withdrawn its Grayscale Ethereum Futures Trust ETF application to the SEC.
In a notice of withdrawal, the crypto asset manager did not state reasons for its withdrawal but did list a number of delays by the SEC in reviewing proposals.
"On November 15, 2023... The Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change," The filing stated.
"On December 18, 2023, the Commission instituted proceedings... To determine whether to approve or disapprove the proposed rule. On March 22, 2024, the Commission designated a longer period for Commission action on the proposed rule change On May 3, 2024, the Exchange withdrew the proposed rule change," it continued.
Bloomberg ETF analyst, James Seyffart, said he was surprised by Grayscale's move.
“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,” he said on X.
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) pic.twitter.com/Kihj2dlQx1
— James Seyffart (@JSeyff) May 7, 2024
In August 2023, the U.S. Court of Appeals for the D.C. Circuit sided with Grayscale against the SEC, ruling that the SEC must review its application to transform its Bitcoin Trust into an ETF.
The SEC had rejected Grayscale's proposal but the court concluded that the regulatory body failed to demonstrate how the digital asset management firm's product was different to approved futures-based funds.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
Grayscale initially filed the 19b-4 application for an Ether futures ETF on 19 September 2023, one month after its victory against the SEC.
Nonetheless, Grayscale might be withdrawing its application to re-file an amended one. "Withdrawing and re-filing is less work for the SEC, but at same time it means there's no way for Grayscale or anyone to sue now,” Seyffart said.
After multiple delays, the SEC is now expected to make a decision on Ethereum ETF approvals on 5 July 2024.