Grayscale Seeks to Add Staking for its Proposed Spot Ethereum ETF

Grayscale Investments, the world’s largest crypto asset manager, is seeking to introduce staking to its proposed spot Ethereum (ETH) exchange-traded fund (ETF), according to a preliminary proxy statement filed on March 19. This move mirrors efforts by other firms, like Fidelity, which amended its spot ETH ETF application on March 18 to include staking services.

Grayscale has proposed four initiatives to investors in a “consent solicitation statement” submitted to the SEC. They include processes related to the creation and redemption of cash and the ability to stake ETH through a trust.

The firm said: 

“The Sponsor believes that having the ability to cause the Trust to stake the Ethereum held by the Trust in exchange for consideration would allow the Trust to mitigate inflationary pressures resulting from Ethereum’s proof-of-stake protocol.”

The move would safeguard the value of the Trust Estate for the ultimate benefit of ETHE’s shareholders. Moreover, it would position the Trust to remain on par with other investment products offering Ethereum staking opportunities, the firm added.

In October, Grayscale filed Form 19b-4 alongside NYSE Arca to convert the Grayscale Ethereum trust (ETHE) to a spot ETF. The company has also previously filed to convert its Grayscale (BTC) Trust to a spot BTC ETF. Grayscale achieved this goal successfully in January after winning a court case and getting approval from the SEC.

Bloomberg Analysts Not Hopeful for Ethereum ETF Approval

On March 19, the SEC delayed its decision on approving spot Ethe ETFs from Hashdex and Ark 21Shares. The regulator is taking additional time to consider the possible impact and regulatory concerns associated with the proposed ETH ETFs. The new deadlines for deciding on Ark21Shares and the Hashdex Ethereum spot ETFs are May 24 and May 30, respectively.

Experts have recently turned sour on the chances of approval for the eight currently proposed ETH ETFs from Grayscale, Invesco Galaxy, BlackRock, Fidelity, VanEck, Hashdex and Franklin Templeton. Bloomberg analysts James Seyffart and Eric Balchunas predict that the pending approvals may continue to be denied in May. Last week, Balchunas lowered the ETH ETF approval odds from 50% to 35%. 

My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round. The SEC hasn't engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall. https://t.co/TyAzAOrAC5

— James Seyffart (@JSeyff) March 19, 2024

Public confidence also seems to have dropped, with Polymarket odds for ETH ETFs being approved by the end of May dwindling to 32%, down from January’s 77% odds.