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Grayscale Withdraws Ethereum Futures ETF Application Ahead of SEC Decision Date

Grayscale's strategic withdrawal from Ethereum futures ETF

Grayscale retracts its Ethereum Futures ETF application shortly before a key SEC decision, stirring speculations about its strategy amid pending approvals for other crypto ETFs.

Key takeaways:

  • Grayscale has unexpectedly withdrawn its Ethereum Futures ETF application ahead of a scheduled SEC decision.
  • The withdrawal comes as the SEC prepares to rule on multiple spot Ether ETF applications, with significant implications for the crypto market.
  • Analysts are recalibrating their expectations for ETF approvals following recent SEC comments and Grayscale's strategic moves.

Grayscale Investments has withdrawn its application for an Ethereum (ETH) futures exchange-traded fund (ETF) with the United States Securities and Exchange Commission (SEC). This withdrawal occurred just three weeks before the SEC was scheduled to make a final decision on the application, initially set for May 30. The application for the Grayscale Ethereum Futures Trust was officially pulled on May 7, despite being poised for listing on the New York Stock Exchange had it been approved.

Implications and timing of the withdrawal

The timing of Grayscale's withdrawal has raised eyebrows in the investment community, particularly because it coincides closely with the SEC’s upcoming decision on several spot Ether ETF applications, due on May 23. Bloomberg ETF analyst James Seyffart had previously speculated that Grayscale might use its Ether futures ETF as a strategic lever to influence the SEC's decision-making process regarding its spot Ether ETF. 

The sudden withdrawal has led to confusion and speculation about Grayscale's overall strategy, especially given the proximity to the SEC's decision on other critical cryptocurrency ETF applications.

SEC Chair Gary Gensler's comments in a May 7 CNBC interview did not clarify the situation but indicated that the SEC is still deliberating on the spot Ether ETFs. This ongoing uncertainty has been reflected in the cautious optimism from analysts, with the likelihood of approval for spot Ether ETFs currently pegged at 25%, a significant decrease from 70% earlier in January.

The SEC is not only expected to make a decision on VanEck's spot Ether ETF application on May 23 but also faces imminent deadlines for other applicants including ARK 21Shares and Hashdex on May 24 and May 30, respectively. Further applications from major players such as Invesco Galaxy, BlackRock, and Fidelity are due through the summer months of June, July, and August. 

Industry observers anticipate that the SEC might approach these decisions in a manner similar to how it handled the spot Bitcoin ETFs earlier in the year, potentially setting a precedent that could impact the entire sector.