‘Trojan Horse?’ Grayscale Withdraws Ethereum Futures ETF Application

In a move that comes as a surprise to many, Grayscale has withdrawn its application for an ether futures ETF just three weeks before the SEC would have been forced to hand out a verdict on the approval of at least one spot ether ETF.

Crypto asset manager Grayscale Investments has withdrawn its application for an Ethereum Futures Trust with the U.S. Securities and Exchange Commission (SEC). 

In a filing on Tuesday, the SEC noted that Grayscale had withdrawn its application on May 3 after the initial application was filed on Sept. 19, 2023. The SEC has delayed issuing a decision on whether to approve or deny the application three times already, with the final decision due on May 30.

“This was essentially a trojan horse filing in my view, in order to create the same circumstances that allowed Grayscale to win the GBTC lawsuit,” noted Bloomberg ETF analyst James Seyffart in a post on X.

UPDATE This is interesting. @Grayscale just withdrew their 19b-4 filing for an #Ethereum futures ETF. This was essentially a trojan horse filing in my view, in order to create the same circumstances that allowed Grayscale to win the $GBTC lawsuit (approve futures deny spot) pic.twitter.com/Kihj2dlQx1

— James Seyffart (@JSeyff) May 7, 2024

However, he expressed confusion over the reason that Grayscale would prematurely withdraw its application for an ether futures ETF, speculating that internal conversations between executives at Grayscale and the regulator might have spurred the decision.

“If you don’t want to piss off the SEC. Withdrawing and re-filing is less work for the SEC. But at the same time it means there’s no way for Grayscale or anyone to sue now,” noted Seyyfart.

Another X user “@Sil veyCorp” speculated that Grayscale’s decision withdraw its application could be for two reasons: They know the spot ether ETFs will be approved and don’t need take legal action to ensure that’s the case, or they know that spot ether ETFs will be denied and are trying to protect the market from more negative price action.

“Maybe they know something big is about to happen with ethereum being declared a security after the ethereum foundation lost its canary. Bad feeling about this,” said SilveyCorp.

Sentiment around a spot ether approval has turned increasingly negative, as Polymarket shows that only 7% of market participants believe a spot ether ETF will be approved by May 31 – the final deadline for the SEC to approve applications from VanEck and Ark 21Shares.