Ethereum ETF: Why Is Grayscale Dropping ETH Futures Application?

Grayscale Investments has sent shockwaves through the industry by dropping its application for the Ethereum Futures ETF. While the organization hasn’t opened up on the reason for its decision, the crypto community has weighed in their opinion. Moreover, Fox Journalist Eleanor Terrett has revealed potential reasons for the withdrawal of Grayscale’s Ether Futures ETF.

Why Did Grayscale Withdraw ETH Futures ETF?

Grayscale recently made headlines as they withdrew their 19b-4 filing for an Ethereum futures ETF. Bloomberg ETF Research Analyst, James Seyffart, characterized the filing as a “trojan horse” strategy. Moreover, he suggested that Grayscale aimed to replicate the circumstances that led to the approval of their GBTC Bitcoin ETF.

In addition, Seyffart highlighted that Grayscale could leverage the contradictory nature of SEC decisions. To prove his point, he cited the SEC’s decision of approving Bitcoin futures-based ETFs while denying Spot Bitcoin ETFs. The analyst added that Grayscale should have sought similar success with an Ethereum futures ETF.

However, the institution played a reverse card and gave up on the opportunity. Seyffart speculated this move to have been influenced by the SEC. He noted that the SEC might have had a meeting with Grayscale executives and convinced them to withdraw the Ethereum futures ETF.

On the other hand, Eleanor Terrett offered another perspective. She noted that Grayscale never completed an S-1 filing for its Ethereum futures ETF. Terrett proposed that the SEC may have been waiting to review a finalized futures application before considering the spot application. Meanwhile, Grayscale could have been awaiting a complete futures application from a competitor.

Since there was no finalized ETH futures ETF application by another party, Grayscale could have pulled the plug on the initiative to save time and resources. Additionally, she pointed out the relatively subdued investor demand for existing Ethereum futures ETFs since their launch last year.

Terrett speculated that Grayscale’s decision to withdraw the ETH futures ETF application could stem from a strategic evaluation of resource allocation. With muted demand for existing ETH futures ETFs and potentially limited prospects for approval, Grayscale may have opted to prioritize other initiatives.

SEC Delays Spot Ethereum ETF Decision

The SEC has continued to delay its decision regarding the Spot Ethereum ETF applications. This could have also fuelled Grayscale’s latest move. The SEC’s recent filing indicates a need for extended examination of the proposed rule change for the Invesco Galaxy Ethereum ETF.

This decision aims to ensure a comprehensive evaluation of the complexities involved before granting approval. Such actions come amidst a backdrop of delays affecting numerous other firms, including Grayscale and BlackRock, which are pursuing similar approvals.

The SEC’s cautious approach reflects the broader regulatory uncertainty surrounding cryptocurrency offerings. While Grayscale’s Ethereum Trust is already registered, challenges persist, as evidenced by the SEC’s recent call for additional public input. These recurring delays underscore the delicate balancing act regulators face in reconciling regulation with the growing demand for crypto investment vehicles.

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