Grayscale files brief in SEC lawsuit over spot Bitcoin ETF rejection


Grayscale, the world’s largest digital asset fund manager, has filed an opening brief in its lawsuit against the U.S. Securities and Exchange Commission.

SEC’s argument “deeply flawed”

In a Twitter thread explaining their plan of action, Grayscale described the SEC’s application of its significant market test as “deeply flawed.”

Furthermore, the fund manager has accused the watchdog of making judgments on matters that do not fall under its jurisdiction, such as the approval of Bitcoin futures ETFs and the rejection of Spot Bitcoin ETFs.

Grayscale lawyers have argued that BTC futures ETFs and Spot Bitcoin ETFs are similar in terms of risk profile and as such, should be treated similarly. 

“We believe the SEC arbitrarily treats spot Bitcoin ETFs differently from ETFs that hold Bitcoin futures, even though they carry the same protections and risks, and deriving their price from the same underlying $BTC markets,” Grayscale said in a tweet. 

The wall street regulator has until 9 November to submit its brief. This will be followed by Grayscale’s reply brief which will be due by 30 November. Both parties are expected to submit the final briefs by 21 December 2022.

The initial lawsuit

The lawsuit was initially filed on 29 June earlier this year, just hours after the SEC rejected Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) to a Spot Bitcoin ETF. 

“The SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934,” Grayscale Senior Legal Strategist Donald B. Verrilli, Jr. said during the announcement of the initial lawsuit in June. 

No Spot BTC ETFs getting approved

Well, Grayscale is not the only crypto firm to get its spot BTC ETF rejected by the SEC. Before rejecting the GBTC conversion, the financial regulator rejected a similar application from Ark21Shares citing a lack of investors’ protections. 

As a matter of fact, the SEC rejected another spot Bitcoin ETF application barely hours before Greyscale filed its brief. Wisdomtree Bitcoin Trust got its ETF application rejected due to a lack of investors’ protection.


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