Grayscale, a prominent digital currency investment company, has recently submitted a proposal to the Securities and Exchange Commission (SEC) for a new Ethereum futures exchange-traded fund (ETF). This move aims to list and trade shares of the Grayscale Ethereum Futures Trust (ETH) ETF under the New York Stock Exchange (NYSE) Arca Rule 8.200-E. With this latest development, Grayscale joins a growing list of firms seeking approval from the SEC for Ethereum futures ETFs.
Grayscale’s proposal to the SEC is in accordance with the provisions of the Securities Exchange Act of 1934, and it aligns with a rule change submitted by NYSE. The ETF is managed by Grayscale Advisors, also known as the “sponsor,” and the document states that the sponsor is in the process of obtaining registration as a commodity pool operator with the Commodity Futures Trading Commission. Additionally, Grayscale Advisors has engaged Videnct Advisory as a subadviser to serve as the trust’s commodity trading adviser.
The Grayscale Ethereum Futures Trust aims to maintain its holdings in Ether futures contracts with a “roughly constant expiration profile,” according to the filing. It emphasizes that the trust will not carry futures positions all the way to cash settlement. Unlike traditional custodial arrangements, the nature of the Ether futures contracts in the ETF does not require the trust to utilize an Ethereum custodian. Instead, the trust will deposit an initial margin amount to initiate an open position in futures contracts. This deposit functions similarly to a cash performance bond, ensuring the trader’s performance of the futures contracts they purchase or sell.
Grayscale’s filing for an Ethereum futures ETF comes shortly after another digital asset management firm, Valkyrie, applied for a similar product in mid-August. Numerous other firms have also filed for Ethereum futures ETFs, creating a competitive landscape in the market. The optimism surrounding the potential approval of the first ETFs based on Ether futures was fueled by a report from Bloomberg, stating that the SEC was set to allow their creation.
While Grayscale faced rejection from the SEC regarding its application to convert the Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin exchange-traded fund, it recently secured a significant partial victory. After the SEC rejected the GBTC application, Grayscale took legal action, resulting in the appeals court granting Grayscale’s petition for review and vacating the SEC’s order to deny the GBTC listing application. This outcome, although not a guarantee for the eventual listing of a Grayscale spot Bitcoin ETF, was received with enthusiasm by the community.
Grayscale’s proposal to the SEC for an Ethereum futures ETF demonstrates the company’s continued interest in expanding its investment offerings in the digital currency space. The ETF, if approved, would enable investors to gain exposure to Ethereum futures contracts through a regulated, exchange-traded product. As competition in the market intensifies with various firms seeking approval for similar ETFs, the decision of the SEC remains eagerly anticipated by market participants. Grayscale’s recent victory in its legal battle with the SEC regarding its Bitcoin ETF application further highlights the company’s determination to navigate regulatory hurdles and provide investors with innovative investment options.