Grayscale Investments Playing Chess with SEC
According to Bloomberg ETF analyst James Seyffart, Grayscale Investments is using its Ether (ETH) futures exchange-traded fund (ETF) application as a “trojan horse” to push the United States Securities and Exchange Commission into approving its spot Ether ETF.
Seyffart expressed this sentiment in a tweet on Nov. 15 after the SEC delayed Grayscale’s ETH futures ETF bid. He believes that if the SEC approves Grayscale’s application, it would open the door for the approval of its spot Ether ETF application.
If the SEC denies Grayscale’s bid, the asset manager could argue that it is treating Bitcoin (BTC) and Ether futures ETFs differently by allowing one under the Securities Act of 1933 but not the other.
“Watch [the SEC] try to either approve and argue why this is different from spot. Or Deny and argue why 1933 act products are meaningfully different from 1940 act products. Both are bad for SEC [in my opinion]. Genius move.”
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 said none of the 40 or so approved Ether ETF products went through this process.
Strategic Maneuvering
Seyffart initially questioned why Grayscale filed its Ether futures ETF via a 19b-4 but now believes they are using it strategically to corner the SEC into a lose-lose situation. Scott Johnsson, General President at Van Buren Capital General, agreed that Grayscale wouldn’t launch the Ether futures ETF but sees it as a means to get spot ETH over the finish line.
The delay of its decision on Grayscale’s Ether futures ETF on Nov. 15 wasn’t surprising according to Seyffart. Hashdex’s application to convert its Bitcoin futures exchange-traded fund (ETF) into a spot product was also put on hold by the securities regulator on Nov. 15.
Hot Take
Grayscale’s strategic move with its Ether futures ETF bid has garnered attention and speculation from industry analysts. The maneuvering suggests a calculated effort to push for approval of their spot Ether ETF through regulatory pressure. It remains to be seen how this strategy will play out in the ongoing crypto regulatory landscape.
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