Crypto asset management firm Grayscale has filed a legal complaint against the U.S. Securities and Exchanges Commission (SEC) for rejecting its spot Bitcoin ETF proposal.
Grayscale Keeps Lawsuit Promise
On June 29, the SEC turned down Grayscale’s proposal to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund. The decision, however, did not sit well with the crypto asset management company, which took immediate legal action in response. In the lawsuit, Grayscale appealed to the U.S. Court of Appeals for the District of Columbia Circuit to review the SEC’s order. In early 2022, the company had pledged to take legal action in the case of a rejection, claiming that it would file a proceeding tied to the Administrative Procedures Act.
CEO Disagrees With SEC’s Decision
During the 240-day review period of the Grayscale application, the company also conducted a comment letter campaign. According to the team, an overwhelming 99% of the submissions received during this time were in support of the bid to convert GBTC into an ETF. In response, the company’s CEO Michael Sonnenshein has also expressed his disappointment with the SEC’s continuous blocking of Bitcoin ETFs from entering the U.S. market.
“Through the ETF application review process, we believe American investors overwhelmingly voiced a desire to see GBTC convert to a spot Bitcoin ETF, which would unlock billions of dollars of investor capital while bringing the world’s largest Bitcoin fund further into the U.S. regulatory perimeter. We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles.”
SEC Cites Market Concerns…Again
Theories about the SEC approving spot bitcoin ETFs have so far not been realized. The watchdog’s grounds for rejecting the Grayscale application were based on concerns of market manipulation. The authorities also cited the lack of appropriate surveillance in the industry, repeating the same reasons it has given for years for rejecting other spot bitcoin ETF applications. In response, the investment firm has decided to argue that spot BTC ETFs should be allowed since the SEC already allowed similar products, which refers to a handful of Bitcoin futures ETFs that the SEC has approved in the past.
Speaking on the matter, Grayscale’s senior legal strategist and former US solicitor general, Donald B. Verrilli, Jr., said,
“As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”
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