Grayscale Files S-1 for Bittensor ETF, Targeting $3B TAO Market and Decentralized AI Boom

Key Takeaways:

• Grayscale has filed an initial S-1 with the SEC to convert its Bittensor Trust into a spot ETF under ticker GTAO
• The proposed ETF will hold TAO directly, offering regulated U.S. exposure to one of the largest decentralized AI tokens
• TAO’s capped 21 million supply, $3 billion market value, and growing AI narrative place it firmly on institutional radar

Grayscale is pushing deeper into crypto-AI by seeking regulatory approval for what could become the first U.S.-listed Bittensor ETF, signaling rising institutional interest in decentralized artificial intelligence assets.

Read More: Grayscale Files Form 10 for Bittensor Trust, Signaling Major Move in AI-Linked Crypto Markets

Grayscale Moves to Bring TAO Into Regulated U.S. Markets

Grayscale has officially submitted an S-1 registration statement to the U.S. Securities and Exchange Commission for the Grayscale Bittensor Trust, laying the groundwork to convert the product into an exchange-traded fund.

If approved, the fund will trade on NYSE Arca under the ticker GTAO and hold TAO, the native token of the Bittensor Network, directly. The structure resembles the past trust-to-ETF conversions of Grayscale where the investor can get exposure without having to handle wallets, custody, or private keys.

The Trust was initially established in April 2024 as a Delaware statutory trust. After the ETF filing, Grayscale intends to change it to Grayscale Bittensor Trust ETF, which will be a clear transition to a fully regulated exchange-traded product.

The current supply of TAO is 21 million tokens which is reminiscent of the scarcity model of Bitcoin. As of the end of September 2025, the number of outstanding TAO is approximately 10 million, daily trading volumes are approximately $42 million, and the market value of this asset is approximately $3 billion, making it one of the top 40 digital assets in the world.

Read More: Grayscale Debuts First U.S. Spot Crypto ETFs With Native Staking Rewards on ETH & SOL

How the GTAO ETF Is Designed to Work

The suggested ETF is based on the premise of a passive investment portfolio, which means that it will not strive to beat the market or implement aggressive trading policies. It has only one goal to trace the value of TAO owned by the Trust, less the cost of operations.

ETF Mechanics and Custody Setup

• Shares will be created and redeemed in blocks of 10,000 shares, known as “Baskets”
• Authorized Participants can create or redeem shares through in-kind TAO transfers or approved cash orders
• BitGo Trust Company currently acts as custodian, with Coinbase Custody expected to join before listing
• Coinbase will serve as the Trust’s prime broker

This creation-redemption mechanism is designed to keep the ETF’s market price closely aligned with its net asset value, reducing persistent premiums or discounts that plagued earlier crypto trusts.

The Trust will not use leverage, derivatives, or lending. Its TAO holdings cannot be pledged, rehypothecated, or used as collateral, limiting counterparty risk.

Bittensor’s Role in the Emerging AI–Crypto Stack

Bittensor is not a typical smart-contract network. It presents itself as a decentralized marketplace of machine intelligence, in which participants are compensated in TAO to submit worthy AI models and computational output.

How the Bittensor Network Works

• Developers submit AI models to the network
• The protocol ranks models based on performance and usefulness
• TAO rewards are distributed according to these rankings
• All activity is recorded on the Subtensor blockchain

It is a crypto-economic architecture that seeks to substitute monopolies in AI with open coordination through incentives. With the increased need of AI compute and inference, Bittensor is one of the very few blockchain projects constructed on AI value exchange, as opposed to general purpose transactions.

Staking Remains a Key Future Variable

Even though the governing documents that the Trust has permit staking, Grayscale is not permitted to stake TAO at the current time due to certain regulatory requirements.

How the Structure Shapes Investor Exposure

• The ETF does not earn staking rewards at launch
• Any future staking would require additional SEC disclosures
• The Sponsor may choose not to pursue staking at all

Should staking be allowed at a later date, it will have the benefit of increasing returns by providing additional yield to price exposure. The ETF is up to that point a pure price-tracking vehicle.