Grayscale Bitcoin Trust vs SEC

Following the SEC’s decision not to convert the Grayscale Bitcoin Trust into an ETF, Grayscale has decided to drag the exchange regulator to the right.

We have filed the opening letter in our lawsuit against the SEC, challenging their decision to deny our application to convert $GBTC to a spot Bitcoin ETF.

A “short” thread:

— Grayscale (@grayscale) 12 October 2022

When with yet another negative decision SEC led by Gary Gensler a few weeks ago rejected Grayscale’s new spot Bitcoin ETF, the top management of the largest fund that invests in cryptocurrencies decided to go all the way and take the US securities regulator to court.

It was in some ways a resounding decision, because it represents the first case of a crypto company suing an authority such as SECwhich in turn has instead opened investigations into dozens of companies in the sector.

It is no coincidence that many companies in the industry, such as Coinbase, immediately supported the fund’s lawsuit with an amicus brief, which is a document filed by a company or organization or individual that is not involved in a lawsuit and believes it can offer expertise that could be valuable in a lawsuit, such as that brought by Grayscale.

The attitude that the Gary Gensler-led body has taken towards the cryptocurrency world has long been considered borderline persecution, given the dozens of lawsuits filed in various capacities against companies in the sector, most notably the two-year lawsuit against Ripple.

The Grayscale Bitcoin Trust

Grayscale is the leading investment vehicle in the crypto world. The main fund, Grayscale Bitcoin Trust, manages approx 2 billion dollars and allows investors to invest in Bitcoin. But the fund offers the opportunity to invest in dozens of other products, related to cryptocurrency. Among the products on display is the Grayscale Ethereum Trust, the main investment vehicle on the second most capitalized cryptocurrency.

Since the launch of the main Bitcoin trust, Grayscale Bitcoin Trust, on September 25, 2013, the gains have been more than 12,000%but in the last twelve months the fund has lost 69.3%.

The trust lasts 643,572 BTC value more than 12 billion dollars. Grayscale Bitcoin Trust is publicly listed on OTCQX, an over-the-counter market under the Alternative Reporting Standard for companies not required to register with the Securities and Exchange Commission (SEC).

It is one of the products that allows institutional investors to invest in the cryptocurrency market, as they cannot directly invest in markets that are not yet regulated, such as the cryptocurrency market.

Cathie Wood invests in Grayscale Bitcoin Trust

One of the main investors in Grayscale Bitcoin Trust is Cathie Woodhis fund, ARK Investment, which again last June submitted an application to the SEC to launch a Bitcoin ETFs.

Wood has always been a supporter of the leading cryptocurrency and recently on a TV show she said she invested $100,000 in 2015, which she still has in her portfolio. This will mean that at current Bitcoin prices it will mean a gain of approx 7 million dollars.

Ark investment currently owns about 5.9 million shares of Grayscale Bitcoin Trust worth about $69.7 million. But it cannot be ruled out that this shareholding will soon be taken up again.

Cathie Wood reiterated that in her opinion, trust is greatly undervalued, as is Bitcoin itself, which Wood is strongly bullish on. At the same time, she said that the Grayscale Bitcoin Trust may soon be allowed to be converted into a spot exchange-traded fund.

The lawsuit against the SEC

To achieve this very goal, after yet another rejection by the SEC, the company decided to take legal action to make its case, as recently stated by the fund’s CEO, Michael Sonnenshein, who claims that this lawsuit does not directly affect Bitcoin.

During a radio program three days ago, Sonnenshein said:

“We really feel that this lawsuit is not about bitcoin. This is about making simple common sense legal arguments that really ensure that investors are protected and that the SEC is acting within its mandate.”

For its part, Grayscale Bitcoin Trust submitted an initial application to the SEC for a Bitcoin ETF in 2016, but voluntarily withdrew it because it felt conditions were not yet ideal. The company then reapplied in October 2021 and received a formal rejection from the SEC, with the regulator citing concerns that the funds were vulnerable to market manipulation.

Grayscale’s CEO concluded:

“We’ve never seen them do this before for any other product, any other commodity that we’ve ever seen. And it used it very, very rigorously to detect bitcoin ETFs, like GBTC [Grayscale Bitcoin Trust]but very lenient on bitcoin futures ETFs, which are really trading outside their authority under [Securities and] Exchange Act. And that is actually one of the strongest arguments.”