Grayscale Investment Comes Down Hard on the SEC

• Grayscale Investments termed the regulator’s decision of rejecting its application to convert Grayscale Bitcoin Trust into a spot bitcoin exchange-traded-fund (ETF) “arbitrary, capricious, and discriminatory” 
• In mid-2022, Grayscale Investment inquired about the District of Columbia Circuit to take a deep dive into the SEC’s decision.

The world’s largest crypto asset manager, Grayscale Investments just found a way to get back at the SEC for rejecting the spot Bitcoin ETF. In an opening legal brief filed as part of its lawsuit against the SEC, Grayscale Investments termed the regulator’s decision of rejecting its application to convert Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded-fund (ETF) “arbitrary, capricious, and discriminatory”

The firm currently holds over 3.4% of all BTC tokens in circulation, filed a suit against the Securities and Exchange Commission counter to the regulator’s decision. Grayscale Investment inquired for the District of Columbia Circuit to take a deep dive into the SEC’s decision. Grayscale asserts;

“The test the SEC has applied to Bitcoin-related ETFs, and only Bitcoin-related ETFs, is flawed and has been inconsistently applied with a ‘special harshness’ to spot Bitcoin ETFs”.

Currently trading at a record of 25% discount in the market means that seeking exposure to Bitcoin via Grayscale could mean a 35% discount from the current price.

WisdomTree and Ark21Shares Application Rejected by the SEC

Grayscale Investment’s application joins a dozen more firms’ applications that have been rejected. The latest application being that of WisdomTree which cited a lack of investor protections and the potential for fraud and manipulation.

WisdomTree’s application was rejected in tandem with the day Grayscale filed its brief.

Despite the SEC turning down several spot ETF applications, on the other side, several bitcoin futures ETFs have been given the green light. The distinction has seen Grayscale lawyers come out terming it as  “arbitrary” and “outside the Commission’s authority.”

According to the lawyers, both Bitcoin futures and spot Bitcoin prices are generated in correlation to overlapping indices. Additionally, both spot prices of Bitcoin spot and futures ETFs are prone to similar risks, and therefore approving one and rejecting the other is unfair.

The crypto community is still on the sidelines as it awaits a spot Bitcoin ETF which would mark a huge milestone for institutional adoption.