Bitcoin news

Grayscale sues SEC over bitcoin ETF application rejection

Less than an hour after the SEC rejected its proposal to turn its flagship Grayscale Bitcoin Trust product into an exchange-traded fund, Grayscale Investments filed a lawsuit against the regulatory body (ETF).

Earlier on Wednesday, the SEC rejected Grayscale’s application, citing concerns about market manipulation, Tether’s place in the larger bitcoin ecosystem, and the lack of a surveillance-sharing agreement between a “regulated market of significant size” and a regulated exchange. These concerns are similar to those the regulator has previously raised in rejecting other spot bitcoin ETF applications over the years.


Grayscale is a subsidiary of CoinDesk parent company Digital Currency Group.

In the document, Grayscale merely requests that the SEC’s order be reviewed by the U.S. Court of Appeals for the District of Columbia Circuit.

In early 2022, the investment company stated that, in the case of a denial, it would launch a proceeding under the Administrative Procedures Act and be ready to sue the SEC. Don Verrilli, a former solicitor general who has worked on APA cases, was chosen by Grayscale to accomplish this.

Grayscale CEO Michael Sonnenshein said in a statement that the company “supports and believes in the SEC’s mandate to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Sonnenshein added that the company is “deeply disappointed by and vehemently disagrees with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market.”

Essentially, the company will argue that the SEC has to allow products that are like other products already trading, in this case bitcoin futures ETFs.
Verrilli told reporters earlier in June that the SEC’s approval of futures ETFs indicate the underlying market must be seen as reliable.
“This is a place where common sense has a really important role to play. You’ve got a situation now in which you have certain kinds of exchange traded funds, one that is focused on bitcoin futures, and the SEC has approved that, the SEC is given it the seal of approval,” he said. “In order to do so it had to make a determination that that giving this approval was consistent with the securities laws, and in particular, that that there wasn’t a sufficient underlying risk of fraud and manipulation.”
To date, only a handful of bitcoin futures ETFs have been approved to trade. Spot bitcoin ETFs trade based on the price of bitcoin itself, while futures-based ETFs trade based on the price of CME’s bitcoin futures product (which in turn is tied to an index). Bitcoin ETF proponents argue that the futures markets are still based on the underlying spot bitcoin price, while the SEC notes that CME’s futures market is regulated by the Commodity Futures Trading Commission (CFTC), a fellow federal agency.

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