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In an opening legal brief submitted as part of its lawsuit against the regulator, Grayscale Investments referred to the SEC’s June decision to deny its request to transform its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF) as “arbitrary, capricious, and discriminatory.”
On June 29, Grayscale filed a lawsuit against the SEC, requesting that the regulator’s decision, which it had earlier in the day published, be reviewed by the U.S. Court of Appeals for the District of Columbia Circuit.
The parent firm of CoinDesk, Digital Currency Group, owns Grayscale as a subsidiary.
Over the past year, the SEC has declined more than a dozen similar applications from other significant players in the cryptocurrency space, including WisdomTree and Ark21Shares, citing a lack of investor protections and the potential for fraud and manipulation. Grayscale is far from the only company whose application for a spot bitcoin ETF has been denied.
The day Grayscale filed its brief was the same day WisdomTree’s most recent application was turned down.
Even though the organization has frequently rejected requests for bitcoin spot ETFs, it has granted several bitcoin futures ETFs, a discrepancy that Grayscale’s attorney’s claim is “arbitrary” and “beyond the Commission’s authority.”
The attorneys claim in the brief that it would be unjust to approve one bitcoin futures ETF while rejecting another because both spot bitcoin and bitcoin futures derive their prices from overlapping indexes and are, therefore, subject to the same risks.
According to Craig Salm, chief legal officer of Grayscale, “the Administrative Procedure Act and Exchange Act require rules and regulations to be enforced without preference for one sort of product or another.”
The SEC must respond by November 9
Grayscale filed a lawsuit against the SEC in the middle of the year after the agency rejected its request to turn its Grayscale Bitcoin Trust, the most significant Bitcoin fund in the world, into an ETF. The fund was established in 2013, and in October of last year, the company filed its intention to modify the structure.
The change would aid in bridging the fund’s almost unprecedented discount to the net asset value. The formation and redemption processes included in the ETF structure aid in maintaining a fund’s price in line with its underlying assets.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
