Grayscale Responds to the SEC’s Veto of the Spot Bitcoin ETF

Grayscale SEC

After the SEC declined Grayscale ‘s original application, the lawsuit was filed in June.
Grayscale Investments has challenged the SEC’s decision to refuse converting the firm’s bitcoin trust to a spot ETF, in the latest regulatory twist surrounding crypto’s long-awaited, market-ready spot ETF products.

According to the Digital Currency Group (DCG) subsidiary, 850,000 Americans possess GBTC and that the SEC should authorize a US spot bitcoin ETF.
According to the SEC, the digital currency asset manager’s application was first denied on June 29 for failing to satisfy the requisite level to avoid fraud and manipulation. As a result, Grayscale sued the SEC and filed a petition to appeal the judgment the same day.

However, other industry insiders are doubtful, claiming that the lawsuit would be difficult to win because authorities have showed no evidence of extending the same permits to spot bitcoin ETFs as they have to futures products.


Grayscale tweet


Grayscale vs SEC, the face off continues


According to Grayscale’s legal brief, the ruling was “discriminatory and unreasoned.” It went on to say that the SEC’s “failure to justify its dramatically divergent treatment of bitcoin futures ETPs and spot bitcoin ETPs” ultimately hurts the trust’s 850,000 shareholders.

Grayscale’s main point 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 claims would provide investors with relatively risk-free exposure because buyers would not have to hold the underlying digital assets outright.

The brief further emphasizes that the prices of bitcoin futures and spot bitcoin are determined by overlapping indices.
According to Grayscale, the SEC must submit its brief by November 9 and respond by November 30. Both sides are expected to submit final revisions by December 21.

Grayscale’s petition coincided with the SEC’s rejection of a proposed rule modification that would have allowed ETF expert WisdomTree to list and trade shares of its planned bitcoin trust on the Cboe BZX Exchange. WisdomTree’s second effort to develop a spot bitcoin ETF failed.