Grayscale ETH Futures ETF Is A 'Trojan Horse' For Spot Ethereum ETF: Analyst

Grayscale's Ether futures ETF application, according to Bloomberg ETF expert James Seyffart, is only a tactic to get the SEC to accept its spot in Ether ETF.

Grayscale Investments is using its Ether ETH $2,053 futures ETF proposal as a "trojan horse" to force the US Securities and Exchange Commission to approve its spot Ether ETF, according to Bloomberg ETF analyst James Seyffart.

Following the SEC's postponement of Grayscale's ETH futures ETF proposal, Seyffart stated in a Nov. 15 X (Twitter) post that if the SEC accepts Grayscale's application, Grayscale will be able to argue for the approval of its spot Ether ETF application.

If the SEC rejects Grayscale's proposal, the asset management might claim that the SEC is treating Bitcoin BTC $37,454 and Ether futures ETFs differently by permitting one but not the other under the Securities Act of 1933.

"Watch [the SEC] try to approve or argue why this differs from spot." Alternatively, refute and explain why elements in the 1933 legislation differ significantly from those in the 1940 statute. Both, in my opinion, are harmful to the SEC. "A brilliant move."

Grayscale's Ether futures ETF offer was made using form 19b-4, which exchanges use to notify the SEC of a security-based swap request. According to Seyffart, none of the approximately 40 authorized Ether ETF products went through the 19b-4 approval procedure.

Seyffart was first perplexed as to why Grayscale registered their Ether futures ETF via a 19b-4. He now believes Grayscale is playing "chess" with the SEC by using the Ether Futures ETF as a "trojan horse" to gain a 19b-4 order from the regulator, trapping them in a lose-lose position.

Grayscale and Scott Johnsson, General President of Van Buren Capital General, decided that the Ether futures ETF will not be launched.

"I doubt this product will ever trade, but it will be useful as a vessel to get spot ETH over the finish line," Johnsson said in a statement.

Seyffart's comments come after the SEC delayed its ruling on Grayscale's Ether futures ETF until Nov. 15 - two days earlier than the deadline of Nov. 17. The delay did not surprise Seyffart.

On November 15, the Securities Commission halted Hashdex's application to convert its Bitcoin futures exchange-traded fund (ETF) into a spot product.

Last week, BlackRock agreed with Seyffart, claiming that the SEC had no reasonable reason to treat bitcoin spot and futures ETF applications differently.

Conclusion

Grayscale's launch of the Ethereum Futures ETF is seen by analysts as a strategic move to pave the way for a spot Ethereum ETF. While the current offering addresses regulatory concerns related to direct ownership of cryptocurrencies, it is viewed as a precursor to a more comprehensive investment product. As the cryptocurrency market continues to evolve, the introduction of innovative financial instruments like ETFs plays a crucial role in expanding investor participation and establishing a more mature and regulated market ecosystem.