What regulatory approvals or potential risks are associated with the DeepBook and Walrus Trusts?

Regulatory backdrop

Both the DeepBook and Walrus Trusts are new Grayscale‑managed structures that must clear the same SEC gate as any other crypto‑linked fund. The trusts are filed as “grant‑or‑discretionary” trusts, which means they still require SEC “no‑action” or “exemptive” relief before they can be listed on a U.S. exchange and offered to retail investors. Until the SEC formally grants that relief, the trusts remain unregistered securities—a status that limits their distribution to qualified investors only and subjects them to heightened compliance scrutiny. In addition, because the products are tied to underlying digital‑asset holdings, they may be subject to ongoing “investment‑company” rule‑making (e.g., the 1940 Act) and to potential future guidance on crypto‑asset custody, valuation and reporting.

Potential risks

1. Regulatory lag – Even after the initial filing, the SEC could delay or condition approval, creating a “regulatory bottleneck” that stalls listing and liquidity. Any adverse comment or a request for additional disclosures can compress the trust’s launch window and compress the market’s ability to price the product accurately.
   
2. Valuation & audit uncertainty – The trusts rely on third‑party pricing of the underlying crypto assets (e.g., DeepBook’s “deep‑liquidity” index). If the SEC or auditors question the methodology, the trusts could be forced to restate NAVs, triggering price volatility and redemption pressure.
   
3. Tax & custody exposure – Because the trusts hold digital assets indirectly, they inherit the tax‑treatment ambiguities of the crypto market (e.g., potential “constructive sale” rules) and the operational risk of custodial partners. A custodial breach or a change in tax policy could materially affect the trusts’ performance and investor sentiment.
   

Trading implication

Until the SEC formally clears the trusts for public listing, the market will price them at a regulatory‑risk discount relative to comparable Grayscale products (e.g., GBTC). Traders can capture this spread by taking a long position on the trusts’ secondary‑market listings (if available) while hedging with short exposure to broader crypto‑indices or GBTC to isolate the regulatory premium. Conversely, a stop‑loss should be set near the level where any SEC denial or adverse comment could trigger a sharp NAV correction—typically 5‑8 % below the current market price. Monitoring SEC filing updates, custodial news, and audit reports will be key to managing the upside versus the regulatory‑risk downside.