Grayscale Investments, renowned for managing the world's largest Bitcoin fund, has filed an application with the Securities and Exchange Commission (SEC) on September 19, 2023 to launch an Ethereum futures-based exchange-traded fund (ETF), according to reports by The Wall Street Journal. The application has been made under both the Securities Act of 1933 and the Investment Company Act of 1940, regulatory frameworks that govern commodities and most security-based ETFs respectively.
This move by Grayscale is significant in light of the SEC's approval of Bitcoin futures ETFs registered under both acts. Furthermore, about a dozen other financial firms including Volatility Shares, Bitwise, ProShares, VanEck, Roundhill, and Valkyrie Investments have also recently applied for Ethereum futures ETFs. Nasdaq’s Hashdex joined the race as well on September 13 with its filing for Hashdex Nasdaq Ethereum ETF.
Grayscale's latest filing follows a court ruling that reversed the SEC's earlier decision to deny Grayscale's application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. The SEC had initially rejected Grayscale's proposal citing concerns about investor protection against fraudulent and manipulative practices in the Bitcoin market.
In response to this denial, Grayscale criticized the agency's stance as “illogical” and “discriminatory”, arguing that the SEC's reasoning was inconsistent as they have used similar arguments to reject numerous Bitcoin-focused ETFs in the past. Moreover, four affiliations - The Blockchain Society, The Chamber of Digital Commerce, the Chamber of Progress, and Coin Center - filed an amicus curiae expressing their support for Grayscale and criticizing the SEC's decision.
The recent court ruling is considered a significant victory for Grayscale in its legal battle against the SEC. It allows them to move forward with their plans for a Bitcoin spot ETF. This development comes amidst the backdrop of Grayscale's GBTC fund currently trading at a 20.3% discount, as reported by Ycharts.
On the same day of the Ethereum futures ETF filing, Grayscale also published a market update detailing its thoughts on US monetary policy. With the Federal Reserve meeting on September 20 to discuss rate hikes and fiscal policy for the last quarter, Grayscale analysts expressed confidence that the outcome will be positive for crypto markets. They anticipate that either the Federal Reserve will signal the end of rate hikes or one more increase in Q4, which they believe will likely drive crypto and traditional assets over the short run.
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