Grayscale Fires Back at SEC’s Veto of Spot Bitcoin ETF

The lawsuit was initially filed in June, after the SEC denied Grayscale’s initial application

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Source: Ben Strack for Blockworks

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key takeaways

  • The rejection was “discriminatory and unreasoned,” Grayscale claims in its brief
  • SEC also rejects WisdomTree’s spot bitcoin ETF for second time

In the latest regulatory twist around crypto’s long-pined-for, market-ready spot ETF products, Grayscale Investments has appealed the SEC’s move to deny converting the firm’s bitcoin trust to a spot ETF.

The Digital Currency Group (DCG) subsidiary claims that 850,000 Americans own GBTC and that it’s past time that the SEC approves a US spot bitcoin ETF.

The SEC initially rejected the digital currency asset manager’s application on June 29 for failing to meet the required standard to prevent fraud and manipulation, the SEC said. Grayscale consequently sued the SEC and filed a petition to review the decision the same day.

A number of industry participants, however, have been skeptical, saying the case would be hard to win, as regulators have shown no signs of granting the same permissions to spot bitcoin ETFs as they have futures products. 

Grayscale said in the legal brief that the decision was “discriminatory and unreasoned.” It added that the SEC “failing to justify its vastly different treatment of bitcoin futures ETPs and spot bitcoin ETPs” ultimately harms the 850,000 investors who own shares in the trust.

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Grayscale’s main argument is that the SEC has previously approved several bitcoin futures ETFs but continues to reject proposed ETFs that would hold bitcoin directly — a move the asset manager says would give investors relatively risk-free exposure, considering buyers would not have to custody the underlying digital assets outright.

The brief also highlights that bitcoin futures and spot bitcoin both generate their price based on overlapping indexes.

The SEC must submit its brief by Nov. 9, according to Grayscale, which will then reply by Nov. 30. Both parties are set to file final versions by Dec. 21.

Grayscale’s filing came the same day that the SEC rejected a proposed rule change that would have given the go-ahead to ETF specialist WisdomTree to list and trade shares of its planned bitcoin trust on the Cboe BZX Exchange. It marked WisdomTree’s second attempt to launch a spot bitcoin ETF.


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