Grayscale, Bitwise Pumping Brakes on ETH Futures Plans

Bitwise Asset Management has requested to withdraw its application to launch an ETF that would invest in ether futures — marking an apparent pullback from a series of notable industry attempts to rival a planned product from Grayscale Investments. 

An amended SEC filing from Grayscale on Wednesday appears to indicate the firm has also halted plans to offer its ether (ETH) futures product.

Grayscale moved last week to launch a fund that offers “actively-managed exposure to ethereum futures contracts.” 

The proposal came alongside plans to also bring to market a Global Bitcoin Composite ETF, as well as a so-called Privacy ETF that would invest in privacy-focused blockchain companies and digital assets.

But an amended May 17 filing shows proposals only for the Global Bitcoin Composite ETF and the Privacy ETF. The SEC declined to comment on Wednesday.

Grayscale’s filing for an ether futures ETF spurred other issuers to follow suit, including Bitwise, as well as Direxion, Roundhill Investments and Valkyrie.  

“The trust no longer intends to seek effectiveness of the fund and no securities of the fund were sold, or will be sold, pursuant to the above-mentioned post-effective amendment to the trust’s registration statement,” the Bitwise filing states.

Spokespeople for Bitwise and Grayscale declined to comment. 

Representatives for Valkyrie and Direxion did not immediately return a request for comment as to the status of their own ether ETF plans. Roundhill Investments could not immediately be reached. 

Grayscale’s amended filing comes a day after the SEC requested that the firm move to withdraw a registration statement for its Filecoin Trust. The trust, launched in 2021, has roughly $470 million in assets under management.

The fund group last month moved to register shares of the trust under the Securities Exchange Act of 1934. 

But the SEC told Grayscale in a May 16 letter that it deemed filecoin (FIL)  a security — and would have to instead register the trust under the Investment Company Act of 1940 as a result. 

“Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position,” the company said in a Wednesday statement. 

The firm also awaits a verdict in its lawsuit against the SEC stemming from the regulator blocking the Grayscale Bitcoin Trust’s (GBTC) conversion to an ETF. A decision is expected before year end.

Long SEC road to ETH futures approval 

Though funds holding bitcoin futures contracts hit the regulated US market in October 2021, their long planned ether futures counterpart vehicles have not yet been approved. 

Other asset managers previously moved to launch their own ether futures ETFs — only to clawback their regulatory proposals in short fashion. ETFs that trade in the US are subject to SEC approval. 

Back in August 2021, VanEck and ProShares both withdrew their applications to launch ether futures days after submitting the filings for the SEC’s sign-off. 

Asked if ether is a security or a commodity during a House Financial Services Committee meeting last month, SEC Chair Gary Gensler did not give a clear answer. 

Updated May, 17, 2023 at 5:33 pm ET. Adds statement from Grayscale Investments, as well as noting that the SEC declined to comment. Also provides additional details around Grayscale’s SEC compliance efforts.

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