Grayscale Sues SEC Over Spot Bitcoin ETF Application Rejection

Grayscale Sues SEC Over Spot Bitcoin ETF Application Rejection

key takeaways

Grayscale has filed a petition for review with the U.S. Court of Appeals challenging the SEC’s order denying the conversion of GBTC into a spot Bitcoin ETF. Grayscale filed the lawsuit hours after the SEC rejected its longtime switch application for failing to meet multiple requirements of the Securities Exchange Act of 1934. The fund’s chief legal strategist accused the securities agency of “arbitrary and capricious” behavior in violation of the required laws.

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Grayscale, the world’s largest digital asset manager, has filed a lawsuit with the U.S. Securities and Exchange Commission after the U.S. Securities and Exchange Commission rejected an application to convert its flagship bitcoin trust fund into an exchange-traded fund.

Grayscale challenges SEC in court

Grayscale has filed a lawsuit with the U.S. Securities and Exchange Commission to reverse its ruling blocking the conversion of the Grayscale Bitcoin Trust into a spot Bitcoin exchange-traded fund.

exist Thursday’s press releasethe world’s largest digital asset management company announced that it has submitted Review application In a U.S. Court of Appeals, the agency’s decision to refuse to convert its flagship GBTC product into a spot Bitcoin ETF was challenged. The request for review comes hours after the SEC rejected the company’s long-requested application for failing to meet multiple requirements under the Securities Exchange Act of 1934.


exist refusal order, the financial watchdog argued that Grayscale had not done enough to protect investors and the public from “fraudulent and manipulative conduct and practices.” Specifically, the agency cited longstanding concerns about the lack of oversight-sharing agreements between listed exchanges and large regulated markets, saying it was necessary to “detect and deter fraudulent and manipulative activity.”

Grayscale’s senior legal strategist and former U.S. Attorney General Donald commented on the SEC’s decision. B. Verrilli, Jr. said the SEC’s failure to “adopt a consistent approach to similar investment vehicles” and thus violated relevant laws was “arbitrary and capricious.” “There is a compelling, common-sense argument here, and we look forward to a productive and swift resolution of this issue,” he said.

Grayscale filed to convert its GBTC investment trust into a spot Bitcoin ETF in October 2021 and remains in talks with SEC after public filing threatened legal action If its application is rejected. The trust’s stock, which is supposed to track the price of bitcoin, currently trades at a discount of about 28.4% to the fund’s net asset value. This is because GBTC stock is not redeemable for the underlying bitcoin held, preventing potential arbitrageurs from taking advantage of the price difference by redeeming the stock. Converting GBTC, the single largest bitcoin investment vehicle that currently holds over 3.4% of all bitcoin in circulation, into an ETF would allow investors to redeem GBTC shares for the underlying bitcoin, ultimately making the fund’s share price comparable to bitcoin’s prices were flat.

However, the SEC appears to believe that the apparent benefits of approving Grayscale’s application do not outweigh the potential harm to Bitcoin and GBTC investors. It remains to be seen whether the U.S. Court of Appeals agrees.

Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.

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