Grayscale has filed a brief against the Securities and Exchange Commission (SEC) for refusing its spot Bitcoin ETF.
The crypto market has been taken over by lawsuits, court rulings, and regulations. The Securities and Exchange Commission (SEC) seems to have another lawsuit against Grayscale after Ripple Labs as the firm now filed a brief against the SEC’s June decision to refuse its application to convert flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF). Grayscale highlighted it as “arbitrary, capricious, and discriminatory” in the legal brief filed in its lawsuit against the regulator.
Grayscale Takes Legal Steps Against The SEC
The world’s largest crypto assets supervisor, Grayscale Investment, has taken some legal actions against the SEC for rejecting its spot Bitcoin ETF application. According to the filing, the SEC issued a rejection after Grayscale made a bid application to convert its $12 billion spot Bitcoin trust into an exchange-traded fund last year’s October.
Grayscale filed its first lawsuit against SEC on 29 June, requesting the U.S. Court of Appeals for the District of Columbia Circuit to review SEC’s refusal decision. However, the SEC mentioned that the application was rejected due to the risks involved in price and market manipulation and security for investors and users. After the SEC denied the application, Grayscale chose to walk with legal steps and filed a brief on 11 October against SEC’s decision.
SEC’s Special Harness Over Spot Bitcoin ETF
According to Grayscale’s filing, the crypto investment firm has highlighted that the price manipulation and risks of investors involved in Bitcoin spot ETF are ‘Arbitrary, Capricious, and Discriminatory.’ According to Grayscale, “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.”
Attorneys for Grayscale argued that the SEC has previously sanctioned Bitcoin futures ETF that carry the same risks as Grayscale’s spot Bitcoin ETF. They further stated that the SEC can’t refuse Grayscale’s spot Bitcoin ETF after accepting several Bitcoin futures ETFs that carry the ‘same risk in the same market.’
Elaborating on this, they stated, “Although Bitcoin may be a relatively new asset, the legal issue here is straightforward. The Commission has violated the APA’s (The Administrative Procedure Act and Exchange Act) most basic requirements by failing to justify its vastly different treatment of Bitcoin Futures ETPs and spot Bitcoin ETPs.” The brief also noted, “That stark arbitrariness cannot be justified. In disapproving the proposed spot Bitcoin [exchange-traded product] here, the commission applied an exceedingly stringent version of the test — going so far as to make findings that directly contradict findings that it made in its orders approving the Bitcoin futures ETPs.”
In a recent interview, Grayscale’s Chief Legal Officer Craig Salm said, “So logically speaking, if you’re OK with one, you must also be OK with the other because you otherwise would be arbitrary. I believe we have very simple, straightforward, and compelling arguments here. In many ways, it’s not about Bitcoin at all. It’s about fair treatment under the law.”
Grayscale also mentioned that SEC’s decision to reject the ETF fund harmed more than 850K investors who own shares in the Trust. The investment firm said, “Given that the Commission did not approve the Trust to trade as an ETP on the Exchange, the value of its shares cannot closely track the value of the Trust’s underlying Bitcoin assets— depriving Trust shareholders of billions of dollars in value.”
The SEC has been given a deadline before 9 November to reply to Grayscale’s brief. However, Grayscale is not the only one to be slammed by the SEC, as the regulatory body previously rejected similar applications from significant industries in the crypto world, including WisdomTree and Ark21Shares, due to a lack of investors’ security and the possibility of fraud and manipulation.
