SEC Balances Act: Grayscale Ethereum ETFs Approved Under Watchful Eye

Grayscale Ethereum ETFs Approved for Generic SEC Standards but Oversight Remains in Place

Grayscale Investments has announced that its Ethereum-focused exchange-traded products (ETPs) have been granted approval under generic regulatory frameworks by the U.S. Securities and Exchange Commission (SEC). The move, detailed in a September 2025 update, reflects the SEC’s evolving stance on digital asset products, though the agency has retained ongoing oversight to ensure compliance with existing financial regulations. The approval aligns with broader regulatory clarity initiatives in 2025, which have contributed to Ethereum’s relative outperformance compared to other crypto assets.

The Grayscale Ethereum Covered Call ETF (ETCO) and the Grayscale CoinDesk Crypto 5 ETF (GDLC), which includes Ethereum as a core holding, are among the products benefiting from the updated standards. ETCO, launched in September 2025, employs a covered call strategy on Ethereum ETPs to generate income for investors. GDLC, a market-cap-weighted basket of five large-cap crypto assets, allocates 16.52% of its portfolio to Ethereum. Both products operate under expense ratios of 0.66% and 0.59%, respectively, and are listed on NYSE Arca.

The SEC’s approval follows years of regulatory ambiguity surrounding crypto ETPs. While the agency has not granted blanket approval for all Ethereum-based products, it has permitted Grayscale’s offerings to proceed under a framework that balances innovation with investor protection. This approach mirrors recent developments in the broader crypto market, where regulators have sought to address risks associated with volatility, market manipulation, and custody practices.

Analysts note that the approval signals a shift in the SEC’s strategy toward digital assets, though challenges remain. For instance, the Grayscale Ethereum Covered Call ETF’s use of derivatives and active management introduces complexities that the SEC continues to monitor. Additionally, the agency has emphasized that the approval does not preclude future regulatory adjustments, particularly as the market evolves.

Grayscale’s Ethereum products have attracted significant institutional interest. The ETCO ETF, with $1.38 million in assets under management as of September 2025, has demonstrated strong trading volumes, averaging 227,541 shares per day. Meanwhile, GDLC’s Ethereum allocation has benefited from increased demand for exposure to the second-largest crypto asset, which has seen its market share stabilize at around 16–17% in 2025.

The approval underscores Grayscale’s role as a bridge between traditional finance and the crypto ecosystem. The firm, which manages over $744 million in digital asset-related AUM, has positioned itself as a leader in structuring compliant investment vehicles. However, the SEC’s continued oversight highlights the agency’s cautious approach to digital assets, particularly in light of past enforcement actions against unregistered crypto offerings.