BREAKING: Grayscale Withdraws 19b-4 Filing for Ethereum Futures ETF Amid Uncertainty

Grayscale Investments has withdrawn its 19b-4 filing for the Ethereum Futures Exchange-Traded Fund (ETF). 

This unexpected decision has stirred speculation and curiosity within the investment ecosystem. James Seyffart, Senior Bloomberg ETF Analyst, announced it, leaving the industry questioning Grayscale’s strategic intentions.

Rationale Behind Withdrawal Remains Unclear

The reason behind Grayscale’s withdrawal is not immediately apparent. The asset management firm applied for this Ethereum Futures ETF in September 2023, shortly after achieving a legal victory over the U.S. Securities and Exchange Commission (SEC) concerning its spot Bitcoin ETF. Industry analysts believe Grayscale aimed to use its Ethereum futures ETF application to bolster its bid for a spot in Ethereum ETF. However, Seyffart suggested that the SEC might have advised Grayscale, possibly influencing the decision to withdraw.

According to Seyffart, Grayscale could be safeguarding its primary objective of securing spot ETF approval. He speculates that the SEC could opt to approve Ethereum Futures ETFs while rejecting spot ETFs, potentially affecting Grayscale’s chances for success. The withdrawal occurred shortly before the SEC was required to rule on Grayscale’s application, adding to the intrigue surrounding the firm’s motivations.

Idk why they'd do this honestly. In my mind might as well make the SEC write up an approval or denial for an ETH futures ETF and go from there? Maybe the SEC spoke with Grayscale about this… And whatever was said convinced Grayscale to withdraw? (This is a complete guess)

— James Seyffart (@JSeyff) May 7, 2024

Speculation Grows Around SEC’s Potential Decisions

The SEC’s decision on Grayscale’s Ethereum Futures ETF was expected on May 30. Bloomberg ETF analysts James Seyffart and Eric Balchunas estimate that spot Ethereum ETF applications have a 25% chance of approval, a decline from the 70% likelihood held earlier this year.

Observers are now speculating that concerns regarding the regulatory climate influenced Grayscale’s decision to withdraw. Currently, the SEC is examining avenues to classify Ethereum as an investment contract. Such a classification would solidify the SEC’s stance against Ethereum-based investment products. This could impact prospective issuers, including BlackRock, Fidelity Investments, and Bitwise, which are also seeking approval for Ethereum ETFs.

Impending Deadlines for Spot Ethereum ETF Applications

The SEC is due to make a decision on VanEck’s spot Ethereum ETF application by May 23. Additionally, ARK 21Shares and Hashdex have deadlines set for May 24 and May 30, respectively. Later deadlines for Grayscale, Invesco Galaxy, BlackRock, and Fidelity are scheduled in the following months. 

Despite these varying deadlines, industry experts believe the SEC could choose to announce its decisions on all applications simultaneously, following the approach used for spot Bitcoin ETFs in January.