SEC requests pause on ETH futures ETFs

Grayscale Investments and Bitwise Asset Management have reportedly suspended their plans for ETH futures ETFs following apparent concerns raised by the U.S. Securities and Exchange Commission (SEC) over the liquidity of ETH futures, and their classification as a security or a commodity.

Crypto asset managers Grayscale Investments and Bitwise Asset Management have reportedly put a pause on their plans to launch ETH futures exchange-traded funds (ETFs), allegedly at the behest of the U.S. Securities and Exchange Commission (SEC), according to sources familiar with the matter.

The concerns cited surround the liquidity of ETH futures and questions over whether ETH is deemed a security or a commodity.

Grayscale, which is known for its substantial Grayscale Bitcoin Trust, has apparently reversed its previous intentions to list an ETH futures product. This change in strategy appears to have prompted a similar shift among its competitors, as inferred from SEC filings and information from insiders.

It has been suggested by SEC representatives that the regulator is not prepared to sanction these products at present. This signals a hesitation to move forward until there is more clarity in the space.

Direxion, a fund manager with nearly 80 ETFs in the U.S., is the latest to retract its proposal for an ETH Strategy ETF, based on a recent SEC filing.

It has also been suggested that the SEC has been asking several potential issuers to withdraw their public filings for ETH futures ETFs and instead discuss the proposals privately.

Bitwise, another firm, also retracted its Ethereum Strategy ETF application, which would have primarily focused on cash-settled ETH futures contracts on the Chicago Mercantile Exchange (CME).

Following this, Grayscale made an amended filing indicating that it was proceeding with ETF plans excluding the previously proposed Ethereum Futures ETF.

Additional firms such as Valkyrie Investments and Roundhill Investments also registered for ETH futures ETFs. However, these firms have largely remained silent about their future plans.

Though the SEC approved bitcoin futures ETFs in 2021, there is concern over the readiness of the ETH futures market for an ETF. Matthew Sigel of fund group VanEck expressed concern over the insufficient liquidity of the CME ETH futures market.

Beyond liquidity concerns, the SEC may also be grappling with questions over ETH’s classification. Bryan Armour from Morningstar suggested that ETH’s status as a commodity or security is a significant point of contention for the SEC.

The SEC’s position signals a need for more clarity in the rapidly expanding world of cryptocurrency, as it continues to carefully evaluate each proposal within the new frontier of crypto ETFs.