Grayscale Files for New Ether Futures ETF

The application was filed under an SEC rule that allows commodity exchange-traded funds.

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Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

Grayscale Investments is seeking to launch a new exchange-traded fund that would track ether futures as multiple firms jockey for first-mover advantage in the highly watched cryptocurrency ETF race.  

The firm filed the ETF with the Securities and Exchange Commission on Sept. 19 under the Securities Act of 1933, which means the fund can hold commodities. Most ETFs are filed under the Investment Company Act of 1940, which allows funds to invest only in securities. Grayscale had already filed for another ether futures ETF under the Investment Company Act of 1940.  

While the distinction between investment rules may seem technical, they are significant because the SEC could approve similar ETFs under different rules. As firms try to crack the code to SEC approval, they are also looking to capture the coveted first-mover advantage. 

Spot bitcoin ETFs, which haven’t been approved by the SEC, are filed under the Securities Act of 1933, while the SEC has approved bitcoin futures ETFs under both acts.  

Ether: a Commodity or a Security?

The SEC is deciding whether to classify ether futures as a commodity or security “has significance for whether ether itself is a security or a commodity,” said etf.com analyst Sumit Roy. “Anything that adds weight to the idea that ether is a commodity rather than a security is generally seen as a positive for the asset.” 

Brazilian firm Hashdex was the first to file for a digital asset ETF under the 1933 Act, in a move Nate Geraci, president of the ETF Store, touted as “brilliant.” Other ether futures applications are filed under the 1940 act.  

The SEC has thus far rejected spot bitcoin ETF applications, citing market manipulation and concerns about investor protection. In a highly anticipated decision, Grayscale prevailed over the SEC last month, when the U.S. Court of Appeals D.C. Circuit ruled that the SEC’s blocking of Grayscale application to convert its Grayscale Bitcoin Trust into an ETF was “arbitrary and capricious,” bringing Grayscale and other asset managers a step closer to launching a so called “spotcoin” ETF. 

Yet ether futures ETFs are a separate battle altogether. The SEC has approved bitcoin futures ETFs, such as the ProShares Bitcoin Strategy ETF (BITO). While the agency previously told firms to withdraw applications for ether futures ETFs, it recently signaled it was open to the investment vehicle after a few key firms refused to withdraw. Firms such as Bitwise Asset Management and Valkyrie Investments have applied to offer ether futures ETFs and are awaiting the SEC's decision.  

Lucy Brewster is a finance reporter at etf.com. Before joining, she was a finance fellow at Fortune covering investing strategy, markets and venture capital. Brewster is a graduate of Vassar College.