Issuers Rush to ‘Piggyback’ on Grayscale Ether Futures ETF Proposal

After Grayscale Investments shared plans earlier this week to launch an ETF focused on ether futures, others have followed suit. 

Bitwise Asset Management, Direxion and Roundhill Investments each filed for similar products Wednesday. 

The proposed offerings would each invest in ether futures contracts traded on the Chicago Mercantile Exchange (CME), according to the registration documents. None would hold ether directly. 

Sumit Roy, an analyst at ETF.com, said issuers appear to be “piggybacking” on Grayscale’s filing on Tuesday for a fund that would offer actively-managed exposure to ether futures contracts.

The crypto asset manager’s product proposal came alongside two others, including an ETF that would invest in bitcoin ETPs trading outside the US, as well as bitcoin miners.

Grayscale is feeling emboldened because of its lawsuit against the SEC, Roy told Blockworks. The firm is challenging the SEC’s decision to block the conversion of its Grayscale Bitcoin Trust (GBTC) to an ETF.   

“Other issuers don’t want to be left out in the cold in case Grayscale prevails in its lawsuit against the SEC and the regulator is forced to take a more permissive approach to crypto ETFs,” he added.

Such filings not new

While several bitcoin futures ETFs are trading in the US, bids to launch ether futures funds have not yet been successful.

VanEck and ProShares filed for funds in 2021 that would invest in ether futures contracts, but chose to withdraw those applications just days later.

The application withdrawals came just two months before the first bitcoin futures ETFs began trading in October of that year. Prior to those approvals, SEC Chair Gary Gensler had signaled that the agency would look favorably upon ETFs investing in such contracts trading on the CME — a derivatives marketplace regulated by the CFTC.

At the time, some industry observers speculated that the companies discontinued their pursuit of launching ETFs due to indications that the SEC would not grant such approvals in the near future.

The firms did not immediately return requests for comment about whether they plan to refile. 

“It’s unlikely that these will be approved, at least until there is a verdict in the Grayscale case,” Roy said of the latest product proposals. “There are still open questions about how the SEC views ether and specifically ether staking.”

While the CFTC has said ether is a commodity, Gensler has said he believes most crypto assets, excluding bitcoin, are securities. When asked if ether is a security or a commodity during a House Financial Services Committee meeting last month, he did not give a clear answer. 

Kraken agreed in February to pay $30 million as part of a settlement with the SEC after the regulator hit the crypto exchange with two charges related to its staking products.

Though Kraken said at the time staking services for the company’s non-US clients would continue uninterrupted, it noted US customers would not be able to stake various assets, including ETH.

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