Grayscale Revises Ethereum ETF Proposal, Excludes Staking Feature Following SEC Guidelines

Grayscale Investments, a leading digital currency asset manager, has recently revised its application for a spot ethereum exchange-traded fund (ETF), notably excluding the staking component initially proposed. This adjustment was disclosed in an updated preliminary proxy statement for the Grayscale Ethereum (ETH) Trust filed earlier this week. The initial proposal had offered an innovative option for investors to engage in staking through the trust, a feature that has now been conspicuously withdrawn from the plan.

The decision to remove the staking proposal from its Ethereum ETF plan aligns Grayscale with a trend observed among several issuers who have reconsidered the inclusion of staking rewards in their spot Ethereum ETF applications. Notably, Fidelity Investments also revised its S-1 registration statement, excluding staking rewards earlier on the same day. This move by two prominent financial institutions underscores a cautious approach towards features that might complicate the regulatory approval process or introduce additional risk factors for investors.

The anticipation of Grayscale’s adjustment was flagged by James Seyffart, a well-regarded ETF analyst at Bloomberg. Seyffart had previously commented on social media platforms about his expectations for Grayscale to follow suit with other institutions by removing staking language from their filing to convert the Grayscale Ethereum Trust into a spot ETH ETF. This strategic pivot is seen as a response to evolving regulatory and market conditions, emphasizing the asset manager’s focus on securing approval for the ETF conversion.

Grayscale’s initial filing for a Form 19b-4 with NYSE Arca in October was aimed at converting the Grayscale Ethereum Trust into a spot ether ETF. This followed their successful conversion of the Grayscale bitcoin Trust into a spot Bitcoin ETF, a milestone achieved after securing approval from the Securities and Exchange Commission (SEC) in January, following a court victory. The move to launch a spot Ethereum ETF is part of Grayscale’s broader strategy to expand its suite of investment products and provide investors with regulated, secure, and diversified exposure to digital currencies.

The broader context of Grayscale’s filing amendment reflects a significant trend among issuers of prospective spot Ethereum ETFs to revise their filings in response to feedback from the SEC. The regulatory body has proactively engaged with Nasdaq and the Chicago Board Options Exchange (CBOE), requesting modifications to their spot ether ETF filings. This engagement has fueled speculation about the potential approval of these innovative financial products, marking a critical juncture in the integration of cryptocurrencies into mainstream investment portfolios.

In response to the SEC’s guidance, several issuers, including market heavyweights like Fidelity, VanEck, Invesco/Galaxy, Ark/21Shares, and Franklin Templeton, have published amended 19b-4 filings. These amendments are crucial as issuers and exchanges navigate the regulatory landscape, seeking to launch spot ether ETFs that meet both investor demand and compliance requirements. With deadlines approaching for revised filings, the investment community eagerly awaits the SEC’s decisions, which could potentially pave the way for the launch of spot ether ETFs.

The withdrawal of the staking proposal from Grayscale’s spot Ethereum ETF plan is a notable development in the evolving narrative of cryptocurrency investment products. As regulatory and market dynamics continue to shape the offerings available to investors, the commitment of financial institutions to adapt and innovate within this framework remains a critical factor in the growth and maturation of the digital asset sector.