The Chess Game with the SEC
In the ever-tangled web of cryptocurrency regulations, Grayscale Investments seems to be playing a game that’s more chess than checkers. According to ETF analyst James Seyffart, the company’s application for an Ether (ETH) futures exchange-traded fund (ETF) might just be a clever tactic to nudge the United States Securities and Exchange Commission (SEC) into approving its long-awaited spot Ether ETF.
The Trojan Horse Concept
Seyffart recently tweeted about Grayscale’s strategy, suggesting that their ETH futures ETF application is akin to a “trojan horse”. Why? If the SEC gives a green light to this futures ETF, that could pave the way for Grayscale to argue for the approval of their spot Ether ETF application. Conversely, if the SEC denies Grayscale’s bid, they’d face the PR nightmare of having to explain why they treat Bitcoin (BTC) and Ether futures ETFs so differently.
A Lose-Lose Situation for the SEC
“Watch [the SEC] try to either approve and argue why this is different from spot. Or deny and argue why 1933 act products are meaningfully different from 1940 act products. Both are bad for the SEC, in my opinion,” Seyffart stated. It’s not just clever—it’s downright diabolical. Grayscale has effectively wrangled the SEC into a corner where any decision they make could potentially backfire.
The 19b-4 Filing Mystique
Grayscale’s Ether futures ETF application was submitted using a 19b-4 form, which is typically utilized to notify the SEC of security-based swap requests. Interestingly, none of the approved Ether ETF products went through this specific process. Seyffart, initially puzzled by the choice of the 19b-4 filing, now believes it is Grayscale’s way of maneuvering the SEC into a difficult position. They are not just applying for an ETF—they are testing the SEC’s mettle.
The Skepticism Surrounding Trading
Despite the strategic brilliance of Grayscale’s tactics, both Seyffart and Scott Johnsson of Van Buren Capital believe the Ether futures ETF is unlikely to ever see the light of trading. Johnsson proclaimed, “Doubtful this product ever trades, but useful as a vessel to get spot ETH over the finish line.” It’s like preparing a grand meal only to use the ingredient for a winning appetizer, leaving the main course unserved.
Delays and Market Reactions
As of November 15, the SEC has further delayed its decision on Grayscale’s Ether futures ETF, raising eyebrows throughout the market. This decision comes just two days ahead of a previously set deadline, catching many off guard. Following suit, Hashdex’s application to convert a Bitcoin futures ETF into a spot product also faced a setback. BlackRock has echoed Seyffart’s sentiments, positing that the SEC lacks credible reasons for differentiating between spot and futures ETF applications in the crypto space.
In Conclusion
As Grayscale continues to navigate the murky waters of ETF approvals, one thing remains certain: their approach has introduced an engaging twist to the regulatory storylines in the cryptocurrency landscape. Only time will reveal the next chapter in this high-stakes game.
