US Chamber of Commerce Rips SEC for Denying Proposed Grayscale Bitcoin ETF

Coinbase and Blockchain Association have both filed amicus briefs as the lawsuit against the commission moves forward

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • US Chamber of Commerce calls SEC’s actions “freewheeling private policymaking” in Tuesday brief
  • Agency’s denial of GBTC’s conversion to ETF “makes little sense” when considering SEC approved a spot palladium ETP, Blockchain Association says

The largest lobbying group in the US is backing Grayscale Investments’ lawsuit against the SEC, which claims the agency unfairly disapproved the proposed conversion of the firm’s bitcoin trust (GBTC) to an ETF. 

US Chamber of Commerce lawyers wrote in an amicus brief filed Tuesday that the SEC’s decision to deny Grayscale’s planned fund reflects “a paternalistic belief that the agency knows better than investors.” The organization, which claims to directly represent 300,000 members, added that the agency’s policy decisions often “depart drastically” from SEC precedent.

“This approach has enabled the commission to pick winners and losers without having to account for its reasoning to the interested public or to the courts, thereby depriving investors of the freedom to make their own investment choices and businesses of the certainty they need to innovate and meet investor demand,” the brief states.

Hours after the SEC rejected Grayscale’s application in June to morph its flagship product into an ETF, the company asked the US Court of Appeals for the District of Columbia Circuit to review the decision

The amicus brief filed by the US Chamber of Commerce, as well as other briefs by crypto exchange Coinbase and the Blockchain Association, come after Grayscale filed its opening brief in the suit last week. 

The 100-page document claims that the regulator is making an “arbitrary and capricious” action as defined by the Administrative Procedure Act (APA). It points out the SEC’s approval of ETFs holding bitcoin futures contracts — the price of which, Grayscale says, is subject to identical risk of fraud and manipulation as the spot price of bitcoin.

Dave Nadig, a financial futurist at VettaFi, previously told Blockworks that the case would be a tough one for Grayscale to win, adding that the SEC’s Congress-approved mandate gives the agency “extremely clear authority” to regulate rule-making about the activities of securities exchanges. 

“The APA undoubtedly affords administrative agencies leeway when making policy judgments entrusted to them by Congress,” the US Chamber of Commerce wrote in the Tuesday brief. “But the APA does not give an agency a blank check to make decisions that affect large sectors of the economy through orders that ignore statutory mandates, draw arbitrary distinctions and rest on broadly applicable policy judgments made in the shadows.”

Coinbase, Blockchain Association double down on support for Grayscale

Coinbase argued in its brief, filed Tuesday, that the spot market for bitcoin is larger and more stable than the bitcoin futures market and other commodity markets for which spot ETPs have been approved.

It added that crypto exchanges such as Coinbase have robust self-surveillance and monitoring practices that prevent manipulation and fraud.

Not approving a spot bitcoin ETF “needlessly hampers innovation, causing the US to fall behind well-regulated markets around the globe that have already adopted such products,” Coinbase wrote.

Lobbying group Blockchain Association said in its brief that aside from the commission’s different treatment between bitcoin futures and spot bitcoin ETPs, the SEC’s decision “makes little sense” when considering it approved the Aberdeen Standard Palladium Trust ETP.   

Bitcoin and palladium share a similar market capitalization and each traditionally have high price volatility, the group argued.

Blockchain Association Policy Counsel Marisa Tashman Coppel told Blockworks that Grayscale’s lawsuit against the SEC is difficult to predict, noting that there are no court cases directly dealing with this point.

“If the court does not rule in favor of Grayscale, investors will continue to be limited in how they may gain exposure to bitcoin, and the SEC will continue on with its pattern of inappropriately discriminating between investment products rather than ensuring investors can choose a product that meets their goals and evaluate the risks of such product through the various SEC-mandated disclosure requirements,” she said.

An SEC spokesperson declined to comment.

The agency is scheduled to offer a response to the filed briefs by Nov. 9.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

Revolut said that the standalone crypto exchange is currently “invite only”

article-image

The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders