Grayscale makes another play for crypto derivatives

Crypto hedge fund Grayscale has filed for a new exchange-traded fund tracking ether futures, as seen in a U.S. Securities and Exchange Commission (SEC) filing on September 19.


Grayscale proposed the listing and trading of shares for the Grayscale Ethereum Futures Trust ETF under the New York Stock Exchange Arca Rule 8.200-E. This proposal aligns with the provisions of the Securities Exchange Act of 1934 and a rule change submitted by NYSE to the SEC.

The regulation follows a slightly different pathway to approval as compared to most of the previously permitted bitcoin futures ETFs. Approved ETFs from issuers like ProShares, Valkyrie and VanEck were filed under the Investment Company Act of 1940.

Grayscale previously filed for a separate ether futures ETF under the Investment Company Act of 1940. Grayscale Advisors, also known as the “sponsor” in the filing, manages the ETF.

Following the US regulators’ reluctance to approve a spot bitcoin ETF, many applicants have turned their focus to products offering exposure to the crypto futures market, bitcoin miners, or companies hold crypto on their balance sheets.

SEC Chair Gary Gensler said that he would be open to approving a bitcoin-futures ETF, but only under certain conditions. The revelation rankled some fund managers who were hopeful of a physically backed ETF but regulated like a normal exchange-traded fund under a 1933 law.

Six entities have filed applications with the agency for ether (ETH) futures-based exchange-traded funds (ETFs). The first application was submitted by Volatility Shares Ether Strategy ETF on July 28, followed by others such as Bitwise Ethereum Strategy ETF, VanEck Ethereum Strategy ETF, Roundhill Ether Strategy ETF, ProShares Short Ether Strategy ETF, ProShares Ether Strategy ETF, and Grayscale Ethereum Futures ETF by August 1.

Historically, the SEC has not approved any ETFs tracking Ethereum futures contracts, although numerous applications have been filed in the past. If the SEC does not deny these applications, the Ether ETFs could launch as early as October 12.

Grayscale’s filing comes after a U.S. court ruled that the SEC was wrong in rejecting its application for a spot bitcoin exchange-traded fund (ETF). The court found that the SEC’s denial lacked sufficient explanation for treating bitcoin futures ETFs differently from spot bitcoin ETFs.

While it’s improbable that the judges will directly instruct the SEC to approve such funds, a victory for Grayscale could prompt the agency to seek other grounds for denying the applications. In an extreme scenario, the SEC might even consider reversing its approval of Bitcoin futures ETFs.