The world’s largest crypto-asset manager Grayscale Investments has filed its opening legal challenge challenging the US Securities and Exchange Commission’s (SEC) decision to deny the conversion of the Grayscale Bitcoin Trust (GBTC) in one place Bitcoin ETFs.
An exchange-traded fund (ETF) is an investment vehicle that pools securities such as stocks or commodities, allowing investors to buy shares on the public market without having to own the underlying assets directly. In the case of a Bitcoin ETF, this is the underlying asset Bitcointhe world’s largest cryptocurrency.
Last October, the SEC allowed several Bitcoin futures ETFs that offer derivative contracts that speculate on the future price of Bitcoin. However, spot Bitcoin ETFs, which will be linked to Bitcoin’s market price, are still not available to US investors.
In its filing with the U.S. Court of Appeals for the District of Columbia Circuit, Grayscale argued that “a fundamental norm of administrative procedure requires that an agency treat like cases equally.”
However, by green-lighting Bitcoin futures exchange-traded products (ETPs) while repeatedly rejecting Bitcoin ETFs backed by the actual underlying asset, the financial regulator acted “in excess of statutory authority.”
“The Administrative Procedure Act and Exchange Act require that rules and regulations be applied without favoring one type of product or another,” Craig Salm, Grayscale’s Chief Legal Officer, said in a statement.
The brief further stated that “while Bitcoin may be a relatively new resource, the legal issue here is simple.”
According to Grayscale, by failing to justify its “completely different treatment” of Bitcoin futures ETFs and detecting Bitcoin ETFs, the SEC “violated the APA’s most fundamental requirements.”
Grayscale’s Battle for a Bitcoin ETF
Grayscale has long sought to convert GBTC, the industry’s largest Bitcoin fund, into a spot Bitcoin ETF, claiming it would help solve the problem of the ever-increasing discount GBTC shares have been trading at since last February.
However, in June of this year, the commission rejected the firm’s application for a Bitcoin ETF, claiming it did not do enough to protect investors from “fraudulent and manipulative acts and practices.”
The decision prompted Grayscale to sue the regulator, and CEO Michael Sonnenshein stated at the time that the investment firm will continue to use all its resources to advocate for investors and “fair regulatory treatment of Bitcoin investment vehicles.”
Tuesday’s brief described the commission’s decision as “arbitrary, capricious and discriminatory,” and further stated that “there is simply no justification for continuing to inflict such serious investor injury.”
According to Grayscale, the SEC must file its brief by Nov. 9, and Grayscale will respond by Nov. 30. Both parties are expected to submit a final brief on December 21.
Yesterday’s filing also came hot on the heels of the SEC once again rejecting the launch of a Bitcoin ETF requested by asset management firm WisdomTree.
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