Grayscale's lawsuit against the SEC seeks to reconsider the rejection of the Bitcoin spot ETF.
In a statement issued on June 29, the U.S. Securities and Exchange Commission (SEC) denied the request to convert Grayscale's Bitcoin Trust into a spot Bitcoin ETFIn the statement, the SEC said the request was denied “to protect investors and the public interest.”
The SEC says one of the reasons it is not accepting the change is that the proposal does not demonstrate how the mechanisms for preventing fraudulent and manipulative assets and practices are designed.
Just hours after the statement was published, Donald B. Verrilli Jr., former US solicitor general and current legal strategist at Grayscale, announced that he had filed a petition for review with the United States Court of Appeals from the District of Columbia.
“Grayscale supports and believes in the SEC’s mandate to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation, and we are deeply disappointed and vehemently disagree with the SEC’s decision to continue to deny Bitcoin ETFs entry into the market,” said Michael Sonnenshein, CEO of Grayscale Investments.
Essentially, the lawsuit will state that The SEC must allow products that are like others that are already listed, in this case referring to Bitcoin futures ETFs. In fact, earlier this month, Verrilli expressed the idea that the SEC's approval of Bitcoin futures indicates that there is a reliable market.
Grayscale's legal battle against the SEC
Grayscale Investment had been preparing for this decision for several months, since the continuous Gary Gensler's statements, SEC chairman, appeared to point toward denying the request.
Grayscale's application was filed in October 2021 and had a deadline for a verdict of July 6, after which On February 4, the SEC decided to delay its decision.
In March, Sonneshein said during an interview with Bloomberg that the company was preparing to take legal action under the Administrative Procedure Act (APA) in case the financial regulator rejects the ETF application.
Since then, they have been recruiting legal talent to address this lawsuit. In addition to Donald B. Verrilli Jr., Grayscale has retained the services of other law firms such as Davis Polk & Wardwell LLP and Craig Salm, who is currently the company's legal counsel.
Positive comments towards Grayscale's Bitcoin ETF
In February, the SEC opened comments and feedback on the proposed conversion of Grayscale’s Bitcoin Trust into a Bitcoin spot ETF.
The proposal immediately received a very long list of comments and opinions. 95% of these were positive and were in favor of the conversion proposal..
One of the most repeated comments was in line with what Verrilli said, saying that the SEC has given the green light to Bitcoin futures ETFs, so a product based on the spot price of the cryptocurrency should be the next step.
Other comments pointed out that if the US did not accept the ETF, it was at risk of lagging behind other countries such as Canada, which already have this type of products.
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