- SEC declined Grayscale request to transform Bitcoin Trust into a spot bitcoin ETF
- The regulator has approved multiple applications to establish bitcoin ETFs based on futures
Grayscale fired off at SEC in a new court filing, over its “fundamentally unreasonable” and “illogical” argument to bar a spot bitcoin exchange-traded fund (ETF), CoinDesk wrote.
They filed a document on Friday 13 in response to the SEC’s defense of its decision to decline Grayscale Investment’s request to transform its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF.
SEC stands by decision
On June 29 last year, when the SEC rejected the request, Grayscale objected by filing a lawsuit before the US Court of Appeals for the District of Columbia Circuit to review the decision.
The SEC stood by its decision to reject the conversion even though a number of industry leaders lent their support to Grayscale. The conversion would have given investors the option to hold bitcoin directly.
“Vulnerable to fraud”
The regulator has approved multiple applications to establish bitcoin ETFs based on futures. These are agreements to execute a trade at a future date and price. However, the SEC claims spot bitcoin ETFs are susceptible to manipulative and fraudulent conduct.
On Friday, Grayscale countered that argument. They commented:
A successful manipulation of prices in the spot bitcoin market would necessarily affect the price of bitcoin futures as well – and, therefore, the value of bitcoin futures ETPs’ holdings.
This is why Grayscale believes the SEC’s logic is faulty. The digital asset management firm also accused the regulator of exceeding its legal authority, saying they were not allowed to decide on a given investment’s merit on behalf of investors.
Increasing pressure
Grayscale’s parent company, Digital Currency Group (DCG), has come under rising pressure to take measures regarding GBTC’s large discount to net asset value. The future is looking bleaker for Grayscale Bitcoin Trust and its CEO Barry Silbert.
After the final briefs on the case are made, which should happen on February 3 at the latest, a panel of three judges will be appointed. According to a blog post by Craig Salm, Grayscale Chief Legal Officer, the court will provide a schedule for the case’s oral arguments thereafter. The post added that a final decision on the case can be expected this fall.
