Grayscale’s ETF Game Against SEC Fails as Agency Delays Ethereum Decision
The SEC has avoided approving Grayscale's Ethereum ETF bid for now.
Key Takeaways
- Grayscale’s hopes of launching a spot Bitcoin ETF were boosted by a legal victory over the SEC.
- The firm has attempted to play the same move in its parallel Ethereum ETF bid.
- However, the Commission has nonetheless stalled a decision on Grayscale’s application.
In its efforts to list crypto exchange-traded funds (ETFs) on the NYSE Arca stock exchange, Grayscale is engaged in a strategy game with the U.S. Securities and Exchange Commission (SEC).
The prize? Permission to launch the first spot crypto fund in the U.S. But the SEC’s stall and delay tactics might have Grayscale trumped.
Grayscale Attempts Multipronged ETF Attack
Although asset managers’ efforts to launch spot Bitcoin ETFs have dominated the headlines, many of the same contenders are pursuing parallel bids to list equivalent Ethereum funds.
After the SEC shut down its application to convert an existing BTC trust into an ETF, Grayscale won a key legal victory that has dramatically improved its chances of approval. In that case, the firm argued that it was unfair to forbid ETFs from investing in Bitcoin spot markets when they had permission to invest in crypto futures.
On the surface, it appears as if the same logic should apply to Grayscale’s ETH trust. However, a technical difference in the way of filing existing Ethereum futures ETFs could undermine any such legal argument.
In its lawsuit against the SEC, Grayscale presented a 19b-4 futures ETF approval letter as evidence. However, current Ethereum funds received approval through a different process, and there is no equivalent letter the firm could present to make the same case again.
Accordingly, when Grayscale filed its own 19b-4 ETH futures application in September, analysts lauded the move for its strategic genius, which could potentially force the SEC to accept spot Ethereum ETFs or risk another defeat in court.
SEC Continues To Delay
So, has Grayscale checkmated its opponent, or does the SEC have one last ace up its sleeve?
At the very least, the agency has bought itself more time, announcing its intention to postpone a decision on the Grayscale Ethereum Trust on Tuesday, December 05.
In its response to the proposed conversion, the commission said it needed more time to consider and extended the deadline for approval or disapproval until January 25, 2024.
By that time, the agency could have approved one or more spot Bitcoin ETFs, which it is currently bashing out the fine details of with Grayscale and others.
Of course, nothing will be certain until the first spot crypto fund hits the market, but if Bitcoin ETFs do arrive soon, they will likely set the mold for any Ethereum-based funds that follow.
