According to the Guardian, Grayling is deciding whether to renationalise the rail line between London and Edinburgh or negotiate a not-for-profit arrangement with current franchisees Stagecoach and Virgin Trains.
"I will terminate Virgin Trains East Coast contract on 24 June 2018", Grayling told lawmakers, adding that the franchise would relaunch as London and North Eastern Railway.
"We have now been advised by the Department for Transport that the Secretary of State for Transport plans to announce today that he intends to appoint the "Operator of Last Resort" to operate the InterCity East Coast trains services", Stagecoach said in a statement today.
Speaking to parliament today, Grayling said after two months of analysis he had concluded that taking the East Coast line back into public ownership would provide the smoothest transition to a new operation.
Transport Secretary Chris Grayling told the House of Commons this afternoon that no decision had yet been taken on the future of the Great Northern franchise, but that Great Northern services coming out of London King's Cross might be merged into LNER.
So I am instructing the new board, working with my officials, to bring forward proposals which enable employees to share directly in the success of LNER both as a pure train operator and subsequently as the new partnership.
Mr Grayling said the decision had been "very finely balanced" between an operator of last resort and a new, non-profit contract for Vtec.
The decision to end the £3.3 billion contract this year has been described as a "bailout" by Labour and trade unions.
Those companies have run the lines on a for-profit basis, but the government has been forced to step in when those contracts have failed, and the government-owned Directly Operated Railways ran the East Coast service from 2009-2015.
It is the third time in a decade that the government has called a halt to the East Coast franchise.
The company pledged to "work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements".
"After three shambolic private sector failures on the east coast, the message should now sink in that these cowboys can not be trusted and should be locked out of the system on a permanent basis".