Following Fidelity's lead, Grayscale looks to add staking for its proposed Ethereum ETF

Companies • March 19, 2024, 5:40PM EDT

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Quick Take

Grayscale proposed to investors on Tuesday in a “consent solicitation statement” four items, including a creation and redemption process involving cash and the ability to stake Ethereum through the trust.
Though the SEC approved spot bitcoin ETFs in January, the road to approval for Ethereum product doesn’t seem likely.

Grayscale Investments is looking to add staking to its proposed spot Ethereum ETH -7.05% exchange-traded fund, according to a preliminary proxy statement filed on Tuesday.

Grayscale proposed to investors in a "consent solicitation statement" four items, including a creation and redemption process involving cash and the ability to stake Ethereum through the trust.

"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 and thereby preserve the value of the Trust Estate for the ultimate benefit of ETHE’s shareholders, and also would position the Trust to maintain parity with any similarly situated investment products that provide for the staking of Ethereum," the firm said in the preliminary proxy statement.

This comes as other firms vying for a spot ether ETF have also added a staking component in their proposals. Financial giant Fidelity amended its spot Ethereum ETF application to include provisions for staking the crypto on Monday.

Grayscale filed a Form 19b-4 alongside NYSE Arca in October to convert the Grayscale Ethereum trust to a spot ether ETF. Grayscale has also previously filed to convert its Grayscale Bitcoin trust to a spot bitcoin ETF, which it did successfully after a court victory and eventual approval from the SEC in January.

Spot Ethereum ETFs may be out

Though the SEC approved spot bitcoin ETFs in January, the road to approval for an ether-backed product doesn't seem likely.

Bloomberg ETF analyst James Seyffart said he expected regulators to turn down spot ether ETFs by May 23.

"My cautiously optimistic attitude for ETH ETFs has changed from recent months," Seyffart posted to X on Tuesday. " 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."

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About Author

Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.