Grayscale Investments, the largest manager of digital currency assets in the world, has sued the U.S. Securities and Exchange Commission (SEC) because the SEC turned down its request to turn its Bitcoin trust into an exchange-traded fund.
The CEO of Grayscale Investments, Michael Sonnenshein, tweeted on June 29: “Grayscale Investments Initiates Lawsuit Against the SEC”
Grayscale Investment is a reliable source for information about how to manage and invest in cryptocurrency assets. The company analyzes the market for digital currencies and gives investors access to this new type of asset.
But in October 2021, Grayscale asked the SEC to change its Grayscale Bitcoin Trust to a spot-based bitcoin exchange-traded fund (ETF).
The Securities and Exchange Commission (SEC) has always said no to the creation of a spot bitcoin ETF. This would have made it possible for regular investors to buy digital assets in the same way they buy stocks. This would have been a big step toward digital assets being used by the general public, but the SEC voted against it.
Unfortunately, Grayscale’s request to change a Bitcoin trust was turned down by the SEC earlier on June 29. The proposals for spot bitcoin ETFs were turned down because the regulator was worried that the market would be manipulated. So, Grayscale’s eight-month conversion drive was turned down, which means legal action will be taken.
On June 29, Grayscale quickly asked the U.S. Court of Appeals for the District of Columbia Circuit to look into the SEC’s decision and overturn it.
Grayscale Sues the SEC
Michael talked about his worries and disappointments with the SEC:
The SEC’s decision to keep blocking spot Bitcoin ETFs from coming to the U.S. market is very disappointing, and we strongly disagree with it.
He thinks that American investors will make it clear during the ETF application review process that they want to convert GBTC to a spot Bitcoin ETF. It would make it possible for billions of dollars to flow from investors and bring the biggest Bitcoin fund in the world closer to the regulatory limits of the United States.
He also said that the company would keep using all of its resources to help its investors and make sure that Bitcoin investment vehicles are treated fairly by regulators.
Senior Legal Strategist at Grayscale, Donald B. Verrilli, Jr., thinks that the SEC is breaking the Administrative Procedure Act and the Securities Exchange Act of 1934 by acting “arbitrary and capriciously.” This includes not treating the same kinds of investments the same way.
He says, “There is a strong, common-sense argument here, and we hope to settle this matter quickly and effectively.”
Aside from this, three Wall Street trading companies—Jane Street, Virtu Financial (VIRT), and Grayscale—signed a deal on Monday to lower the discount on their Bitcoin Trust in preparation for an ETF conversion.
David LaValle, the company’s global head of ETFs, said that even though the SEC has not yet approved their application, it shows that they are ready for when it does.