Grayscale Threatens Legal Action if SEC Rejects Bitcoin ETF Conversion Bid

The world’s largest digital currency asset manager first filed to convert its flagship trust into a spot bitcoin ETF almost a year ago

article-image

Michael Sonnenshein, CEO, Grayscale Investments; Blockworks exclusive art by axel rangel

share

key takeaways

  • Grayscale CEO Michael Sonnenshein said that the issuer is not ruling out any options when it comes to converting GBTC
  • The SEC has been denying bitcoin spot ETF applications for years, but Grayscale is confident approval will come eventually

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said. 

“I think all options are on the table,” Sonnenshein said during an interview with Bloomberg Monday when asked if Grayscale would consider an Administrative Procedure Act lawsuit if their application to convert the Grayscale Bitcoin Trust (GBTC) into an ETF is denied. 

The world’s largest digital currency asset manager first filed to convert its flagship trust, which is inferior to the currently prohibited spot bitcoin ETF structure, Sonnenshein said, in April 2021. Since then, the SEC has approved the first futures-backed bitcoin funds, but all applications for a spot product continue to be delayed

“The Grayscale team has been putting the full resources of our firm behind converting GBTC, our flagship fund, into an ETF,” Sonnenshein said. “It’s really important that investors know that we have and will continue to advocate for them.” 

The SEC is currently seeking public comment on whether to approve a bitcoin spot ETF. The regulator has given issuers, investors and other interested parties 240 days to submit input; the period closes in early July. 

Grayscale has been encouraging investors to submit comments, even creating an education page and email form on its website

“This is a really, really important part of the process,” Sonnenshein said.

“GBTC today is owned by investors in all 50 states, and there’s actually now over 800,000 accounts in the US all waiting patiently to have it converted into an ETF.” 

The SEC has cited concern about market manipulation as the main hurdle to approving a spot product. 

“When reviewing bitcoin spot ETPs, the commission must apply all the standards of the Exchange Act, which it has followed in connection with its orders considering previous proposals to list bitcoin spot ETPs,” SEC Chair Gary Gensler wrote in a recent letter.

“In particular, the commission must consider if the bitcoin spot ETP proposal is designed to prevent fraudulent and manipulative acts and practices.”

Despite the lengthy regulatory process, Sonnenshein insisted that the team at Grayscale remains confident that the conversion to an ETF will happen eventually. 

“Ultimately, we believe it’s a matter of when not a matter of if a spot Bitcoin ETF is approved,” he said.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

LTIPPanalysis.png

Research

This report is a retroactive analysis of Arbitrum's Long Term Incentives Pilot Program (LTIPP). We collect relevant data at a protocol level and review bi-weekly updates to analyze recipients, their strategies, and the impact of the incentives on high level growth metrics. In particular, we want to highlight outperformers and underperformers, and glean any best practices or lessons learned for protocols distributing ARB incentives in the future. The overarching goal is to synthesize lessons learned that the DAO can reference as it begins thinking about future incentives programs–namely, the working group for incentives that is being actively discussed–especially as Timeboost introduces new conditions for trading and economic activity.

article-image

OFAC sanctioned Tornado Cash in 2022, claiming the mixer had been used to launder more than $7 billion in crypto

article-image

The Fed’s preferred inflation gauge showed that prices increased 0.2% from September and 2.3% annually

article-image

While acknowledging potential headwinds for risk assets, Galaxy’s Alex Thorn notes there are also plenty of catalysts

article-image

BuilderNet is a new block building network designed to return more MEV and gas fees to users

article-image

Ledn’s John Glover gives some price targets to watch for bitcoin

article-image

Sponsored

AI project Zerebro intersects the spheres of artificial intelligence, finance, art, music, and culture