Grayscale Sues The SEC After Spot BTC ETF Rejection: Report

Grayscale sues the SEC after the spot BTC ETF rejection saying it didn’t do enough to prevent possible fraud so let’s read more today in our latest Bitcoin news.

The SEC rejected an application from Grayscale Investments to convert the Grayscale BTC  trust to an ETF whcih is an effort that the company has been publicly pushing since April of 2021. Now, Grayscale sues the SEC. In the ruling, however, we can see that the SEC said the spot ETF application didn’t do enough to protect investors from fraudulent and manipulative acts and practices. After the SEC made the announcement, Grayscale CEO Michael Sonnenshein took to Twitter to announce the legal action.

We’ve filed a lawsuit against the SEC. $GBTC

— Sonnenshein (@Sonnenshein) June 30, 2022

According to Grayscale, the company will be filing for a petition to review with the US Court of Appeals for the District of Colombia and challenge the decision to deny the conversion of a Grayscale BTC trust to spot BTC ETF:

“We are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market.”

Sonnenshein went on to say that Grayscale will continue leveraging the resources and advocate for the investors and the regulatory treatment for BTC investment vehicles. Earlier this month, Grayscale announced that it hired legal counsel like Donald B Verrilli, former Solicitor General of the US, and law firm Davis Polk & Wardwell. Verrilli said in the press release:

“The SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”

Grayscale was founded in 2013 as a subsidiary of the Digital Currency Group. The company provides market information and exposure to digital assets and investment products, and since its launch, the company filed several applications for BTC ETFs. Grayscale also wrote about the approval journey:

“Grayscale first submitted an application for a Bitcoin ETF in 2016 and spent the better part of 2017 in conversations with the SEC. Ultimately, we withdrew our application because we believed the regulatory environment for digital assets had not advanced to the point where such a product could successfully be brought to market.”

As we enter the final month before a response is due on our application to convert $GBTC to an ETF, we have retained Donald B. Verrilli, Jr., former Solicitor General of the United States, as additional legal counsel. A short 🧵 on why:

— Grayscale (@Grayscale) June 7, 2022

The exchange-traded fund bundles securities like commodities or stocks and allows investors to buy shares on the public market without having to own the assets like Bitcoin in this case. Last October, the SEC allowed a BTC futures ETF which offers derivative contracts which speculate on the future price of BTC, and still hasn’t allowed a bitcoin spot ETF that will be tied to the BTC current price. The Grayscale Bitcoin trust now has $12.9 billion under management and the shares traded at less than the net value of the BTC held by the company since 2021.