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Grayscale Pushes Back on SEC Decision Regarding Bitcoin ETF

Steve Miley trader
Updated 12 Oct 2022

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Key points:

  • Grayscale Accuses SEC of ‘special harshness’ toward Bitcoin trading
  • Other Companies Also Denied
  • Grayscale Brief States SEC Rejection of Bid for Bitcoin ETF is Unfair

Grayscale Investments has filed a brief against the SEC, stating that the SEC rejection to convert its $12 billion spot Bitcoin trust into an exchange-traded fund is unfair. The SEC has rejected dozens of other applications in a similar vein. Grayscale argued that “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.”

Grayscale Accuses SEC of ‘special harshness’ toward Bitcoin trading

Grayscale Investments LLC, the crypto asset manager which oversees the largest bitcoin investment fund in the world, filed its initial brief against the US Securities Exchange Commission (SEC). This is to challenge the decision by the SEC that denied the application by Grayscale to transform the Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin Exchange Traded Fund (ETF). On Tuesday, Grayscale stated to a federal appeals court that the SEC is so distrustful of Bitcoin (BTC) trading that it blocked a request to make it both safer and easier for investors to be exposed to the cryptocurrency.

Also Read: What Is the Crypto Fear and Greed Index?

Other Companies Also Denied

Grayscale is not the only company to have their spot bitcoin ETF application rejected. In the past year, the SEC has denied multiple applications like the one from Grayscale. These include applications from WisdomTree and Ark21Shares, alongside other major players from the crypto world. The SEC have cited the potential for manipulation and fraud, alongside a lack of investor protections as reasons for denying these applications.

While the SEC has continually rejected applications for bitcoin spot ETFs, it has approved numerous bitcoin futures ETFs. Grayscale’s lawyers claim that the SEC has made a distinction between the offerings which is “arbitrary” and “outside the Commission’s authority.”

Grayscale Brief States SEC Rejection of Bid for Bitcoin ETF is Unfair

In the brief, Grayscale’s attorneys argue that, as both spot Bitcoin and Bitcoin futures prices are based on very similar indices, the spot price of Bitcoin for both futures and spot ETFs are exposed to the equivalent risks, approving one and denying another, therefore, is unfair.

In an interview with Reuters, Craig Salm, Grayscale’s chief legal officer highlighted that Bitcoin spot prices and bitcoin futures are subject to the same risk of fraud that has historically been of concern to the SEC. 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.”

Steve has 29 years of financial market experience including 3 years at Credit Suisse and 15 years at Merril Lynch. Steve is the Academic Dean for The London School of Wealth Management and has won many awards from Technical Analyst Magazine.