Nov 16, 2023

Is Grayscale’s ETH Futures ETF a ‘Trojan Horse’ for Spot Ethereum ETF?

Crypto Analyst Discusses Potential Grayscale ETH Futures ETF 'Trojan Horse' for Spot Ethereum ETF
Grayscale ETH futures ETF a ‘trojan horse’ for spot Ethereum ETF: Analyst

Grayscale’s ETF Application as a Trojan Horse

Bloomberg ETF analyst James Seyffart believes that Grayscale Investments is using its Ether (ETH) futures exchange-traded fund (ETF) application as a “trojan horse” to corner the United States Securities and Exchange Commission (SEC) into approving its spot Ether ETF. He said in a Nov. 15 Twitter post that if the SEC approves Grayscale’s application, then it would enable Grayscale to argue for the approval of its spot Ether ETF application.

On the other hand, if the SEC denies Grayscale’s bid, the asset manager could argue that the SEC is treating Bitcoin (BTC) and Ether futures ETFs differently by allowing one under the Securities Act of 1933 but not the other.

Grayscale’s Ether futures ETF bid was submitted via a form 19b-4 — which exchanges file to inform the SEC of a security-based swap request. Seyffart noted that none of the 40 or so approved Ether ETF products went through the 19b-4 approval process.

Grayscale’s Plan to Corner the SEC

At first, Seyffart was perplexed about why Grayscale filed its Ether futures ETF via a 19b-4. Now, he believes Grayscale is trying to outmaneuver the SEC by using the Ether Futures ETF as a “trojan horse” to force a 19b-4 order from the regulator.

Seyffart and Scott Johnsson, General President at Van Buren Capital General, concurred that Grayscale wouldn’t launch the Ether futures ETF. “Doubtful this product ever trades, but useful as a vessel to get spot ETH over the finish line,” Johnsson said.

The SEC delayed its decision on Grayscale’s Ether futures ETF on Nov. 15 — two days earlier than its Nov. 17 deadline. Seyffart said he wasn’t surprised by the delay, as Grayscale is using crypto SEC tactics to corner them into a lose-lose situation.

The US Securities and Exchange Commission (SEC) suspended Hashdex’s plan to convert its Bitcoin futures ETF into a spot product on Nov. 15. BlackRock also expressed a similar opinion to Seyffart, claiming that the SEC has no valid reason to treat spot and futures cryptocurrency ETF applications differently.

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