On May 7, the US Securities and Exchange Commission (SEC) reported a significant withdrawal by Grayscale that could have far-reaching implications for spot Ethereum ETFs. Specifically, NYSE Arca pulled a proposed rule change in a 19-b4 filing that would have listed and traded shares of Grayscale’s Ethereum Futures Trust ETF.
The withdrawal came on May 3, just days before the SEC notice, with the regulator set to make a decision on the rule change by May 30. Grayscale has remained silent on the matter.
While Grayscale’s pending futures Ethereum ETF is not directly linked to its more high-profile attempt to convert the Grayscale Ethereum Trust (ETHE) to a spot ETF, the two filings are connected. According to Van Buren Capital GP Scott Johnson, Grayscale submitted the futures Ethereum ETF application to prompt the SEC to issue a 19b-4 order to document its analysis of futures-based ETFs.
Taking to Twitter, Johnson remarked, “This [19-b4] order is an important part of the mosaic that the SEC was going to be forced to maneuver through as we approached the ETH spot ETF deadlines coming up this month.” He expressed confusion over the withdrawal and suggested that Grayscale should have wanted the 19-b4 order as it could have only helped their case.
Meanwhile, Bloomberg ETF analyst James Seyffart labeled the proposed rule change as a “trojan horse filing” that would have allowed Grayscale to challenge the SEC if their application was rejected. Seyffart speculated that the SEC may have convinced Grayscale to withdraw the application during discussions, ultimately limiting the company’s options to sue the agency.
The withdrawal could have ramifications for both Grayscale and others in the industry, potentially impacting the future of spot Ethereum ETFs.
