Crypto adoption

Grayscale : a legal action against the SEC for a Bitcoin ETF Rejection

According to reports, Grayscale is considering legal action against the US Securities and Exchange Commission (SEC). 

Image Source : Coinpress

It’s a capricious decision !

This follows the regulator’s decision to reject an application by Grayscale Investment. to convert its Grayscale Bitcoin Trust (GBTC) into an exchange traded fund (ETF). So Grayscale will not be able to convert its billions of dollars in Bitcoin into an exchange-traded fund, bad news for the crypto sphere whose hope has been crushed again by this just-published decision.

As a reminder, Grayscale is a digital currency manager, and had filed an application this month for its $20 billion Bitcoin Trust fund to be converted into a post-trade ETF on the NYSE Arca exchange.

Grayscale believes that this decision is the result of whim.

 It is important to note that Grayscale has been pushing this conversion since April of last year. At the very beginning of 2022, Grayscale had actually promised to sue in the event of a rejection, stating that it would certainly submit a case related to the Administrative Procedures Act.

During the 240-day testimonial period of the Grayscale application, the company also completed a draft remark letter. According to the group, a frustrating 99% of the entries obtained throughout this period remained in support of the proposal to turn GBTC directly into an ETF

CEO Michael Sonnenshein shared his frustration with the SEC:

During the ETF application review process, we believe that U.S investors overwhelmingly expressed a desire for the GBTC to become a Bitcoin spot ETF, which would unlock billions of dollars of investor capital and bring the world’s largest bitcoin fund into the U.S regulatory perimeter; we will continue to use all of the firm’s resources to advocate for our investors and for the fair regulatory treatment of bitcoin investment vehicles.

He added : 

We are deeply disappointed and disagree with the vehemence of the SEC’s decision to continue to prevent Spot Bitcoin ETFs from entering the US market.

Lack of ideal oversight

According to the SEC’s decision, there was insufficient information about how Grayscale’s cash ETF would protect investors from “fraudulent and manipulative acts and practices.” 

The authorities mentioned the lack of ideal oversight in the sector, replicating exactly the same factors it has offered for many years to deny various other bitcoin spot ETF applications. 

It is worth noting that the first application for a Bitcoin ETF filed by the investment firm with the SEC was in 2016.

Subsequently, it was found that the regulatory environment surrounding digital assets was not safe enough to introduce such a product to the market, so the application was withdrawn. To increase the chances of approval, the investment company appealed to the public by launching an extensive marketing campaign to defend the company’s initiative. Bitcoin ETF with the SEC.

Donald B. Verrilli, Jr, Grayscale’s senior legal strategist and former U.S. Solicitor General argues that the SEC is not applying “consistent treatment to similar investment vehicles” and is violating “the Administrative Procedure Act and the Securities Exchange Act of 1934.”

The SEC does not apply consistent treatment to similar investment vehicles and therefore acts in an arbitrary and capricious manner.

Don Verrilli, attorney for Grayscale.

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