Grayscale Slams SEC’s Illogical Bitcoin ETF Disapproval

Grayscale, a digital asset management firm, recently filed a lawsuit in which it slammed the U.S. securities regulator for its illogical and fundamentally irrational reasoning against authorising a spot bitcoin exchange-traded fund (ETF).

On Friday, Grayscale Investments submitted a response to the SEC’s December justification of its decision to deny the company’s request to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF).

The next day, June 29, 2022, Grayscale filed a lawsuit asking the U.S. Court of Appeals for the District of Columbia Circuit to examine the SEC’s denial of its application. Grayscale received support from several industry leaders, but the SEC ultimately rejected the conversion, which would have given investors direct ownership of bitcoin.

NEW TODAY: Read about our latest filing in our lawsuit challenging the SEC’s decision to deny our application to convert $GBTC to a spot #bitcoin #ETF: https://t.co/d7XdCtqYbI

— Grayscale (@Grayscale) January 13, 2023

Futures-based bitcoin ETFs, which are trading agreements to be executed at a future date and price, have been authorised by the SEC on many occasions. However, spot bitcoin ETFs have been deemed unsafe due to the risk of fraudulent and manipulative conduct.

On Friday, Grayscale disputed that claim. It stated that the price of bitcoin futures, and hence the value of bitcoin futures ETPs’ holdings, would unavoidably be affected by a successful manipulation of prices in the spot bitcoin market. The explanation presented by the SEC was deemed illogical by Grayscale.

Grayscale further claimed that the SEC was acting outside of its legal power by asserting that it’s not entitled to judge for investors whether particular investments have merit.

Grayscale Chief Legal Officer Craig Salm stated in a separate blog post that the court would choose three judges and release a date for the lawsuit’s oral arguments after the last filings on the issue are due on February 3. A resolution to the matter, he said, may be reached before the end of the year.

There is growing pressure on Digital Currency Group (DCG) and its CEO, Barry Silbert, to address Grayscale’s token GBTC’s significant discount to its net asset value.

And CoinDesk is a subsidiary of DCG.