SEC’s Procrastination: Will Grayscale’s Ethereum ETF Ever Get a Break?

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In a move that can only be described as a masterclass in bureaucratic delay, the U.S. Securities and Exchange Commission (SEC) has decided to postpone its verdict on a rather intriguing proposal concerning Grayscale’s Ethereum spot ETF products. One might wonder if the SEC has taken a page from the playbook of a particularly indecisive cat, forever contemplating whether to leap onto the windowsill or simply stare at the wall.

This proposal, which would allow the ETFs to earn a little extra pocket money by staking their Ethereum positions, was initially submitted by NYSE Arca on the most romantic of dates, February 14, 2025. Ah, love is in the air—or perhaps just the scent of regulatory paperwork. The proposal was made available for public comment on March 3, 2025, which, as we all know, is the perfect time for a good old-fashioned regulatory love fest.

SEC Extends Grayscale Ethereum ETF Proposal Review: A Comedy of Errors

According to a notice released on April 14, 2025, the SEC has graciously decided to extend the timeline for action on NYSE Arca’s proposal regarding the Grayscale Ethereum Trust ETF and its diminutive counterpart, the Grayscale Ethereum Mini Trust ETF. One can only assume that the SEC is taking its time to ensure that every possible nuance of the proposal is thoroughly examined—perhaps over a cup of tea and a biscuit.

Originally, the SEC had a 45-day review period that would have concluded on April 17, 2025. However, in a stroke of bureaucratic genius, they have now extended this deadline to June 1, 2025. It seems that the SEC has found itself in a delightful quandary, as Grayscale recently filed a 19b-4 for the Hedera ETF, adding yet another layer of complexity to this already tangled web of regulatory intrigue.

In its notice, the Commission stated it “finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein.” In layman’s terms, they’re saying, “We need more time to figure this out, folks!” And, amusingly, they noted that they have received no public comments on the proposed rule change to date—perhaps everyone is too busy binge-watching the latest series on streaming platforms.

The SEC’s decision to extend the review period is, of course, a standard procedural maneuver, akin to a waiter taking his sweet time to bring your dessert while you contemplate the meaning of life. Under Section 19(b)(2) of the Securities Exchange Act of 1934, the SEC has the authority to extend its review period from the standard 45 days to a luxurious 90 days if it “finds such longer period to be appropriate and publishes its reasons for so finding.” How very generous of them!

SEC’s Approval: The Holy Grail for Grayscale’s PoS Aspirations

If, by some miracle, the proposal is approved, it would be a significant boon for Ethereum ETFs, allowing Grayscale products to join the illustrious ranks of Ethereum’s proof-of-stake system. Staking, for those uninitiated in the arcane arts of cryptocurrency, involves locking up ETH to ensure the network runs smoothly, with users rewarded for their troubles. For ETF investors, this could mean a delightful little bonus on top of the appreciation in Ethereum’s price—because who doesn’t love a little extra cash?

Currently, Grayscale’s Ethereum Trust ETF and Ethereum Mini Trust ETF hold Ethereum but are not reaping the rewards of staking yield. The proposed rule change would fundamentally alter the way these funds operate, much like a new chef taking over a tired old restaurant.

The Commission must ultimately decide whether to approve the proposal, disapprove it, or initiate a procedure to determine if it should be disapproved by June 1, 2025. This deadline aligns perfectly with the SEC’s notoriously cautious approach to the wild world of cryptocurrency investment products.

If the rule revision passes, it could set a precedent for other Ethereum ETF issuers seeking similar relief for their funds. It may also provide a glimpse into the SEC’s evolving stance on proof-of-stake involvement with regulated investment products. After all, Grayscale had previously sought a Litecoin ETF from the SEC and an XRP ETF from the NYSE back in January—because why not throw a few more fish into the regulatory pond?

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2025-04-14 19:24