Grayscale Investments has adopted a strategic approach to navigate the regulatory landscape surrounding Ether-based exchange-traded funds (ETFs) in the United States.
Bloomberg ETF analyst James Seyffart suggests that Grayscale is employing its Ether futures ETF application as a “trojan horse” to push the United States Securities and Exchange Commission (SEC) towards approving its spot Ether ETF.
On November 15th, Seyffart took to Twitter to express his viewpoint following the SEC’s decision to delay Grayscale’s ETH futures ETF application.
He believes that if the SEC were to give the green light to Grayscale’s application for an Ether futures ETF, it would set a precedent that could be leveraged to argue for the approval of its spot Ether ETF application.
Conversely, if the SEC were to deny Grayscale’s bid for an Ether futures ETF, the asset management firm could argue that the SEC is applying different standards to Bitcoin and Ether futures ETFs.
This differentiation would manifest by permitting one under the Securities Act of 1933 while rejecting the other.
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Seyffart predicts that the SEC will be faced with a challenging decision: either approve the Ether futures ETF and justify its differentiation from spot ETFs, or deny it and defend why products governed by the 1933 act are substantially distinct from those regulated by the 1940 act.
In his opinion, both scenarios pose difficulties for the SEC, making Grayscale’s move strategically astute.
Notably, Grayscale submitted its Ether futures ETF application via a 19b-4 form, a filing intended to inform the SEC about a security-based swap request.
Seyffart observed that none of the approximately 40 approved Ether ETF products had followed this 19b-4 approval process, initially leaving him puzzled about Grayscale’s choice.
However, Seyffart now interprets this move as part of Grayscale’s strategic “chess” game with the SEC.
By using the Ether futures ETF as a “trojan horse,” Grayscale seeks to secure a 19b-4 order from the regulator, positioning itself to corner the SEC into a precarious situation, regardless of their decision.
In summary, Grayscale Investments is strategically maneuvering within the regulatory framework to gain approval for its spot Ether ETF by leveraging its Ether futures ETF application as a catalyst for change in the SEC’s stance on cryptocurrency-based ETFs.
This calculated approach aims to leave the SEC in a challenging position, regardless of their ultimate decision.
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