Grayscale submitted documents to the Securities and Exchange Commission (SEC) in October of last year in order to turn its Bitcoin Trust into an ETF. Following several extensions, the regulatory agency on Wednesday issued a rejection decision. Likewise, Grayscale’s application did not address the regulator’s concerns regarding how it would guard against market manipulation and safeguard the interests of investors and the general public.
As a result, the SEC has not yet given the go-ahead for a spot Bitcoin ETF. However, it has already approved a few products based on futures. In November of last year, the crypto asset management firm wrote to the SEC with the same justification. They had argued that it was “arbitrary and capricious” for the SEC to approve futures products but not spot ones. Additionally, the firm underlined that the bias in question might constitute a breach of the Administrative Procedure Act.
Donald B. Verrilli, Jr., senior legal strategist at the firm, reiterated the same by saying,
“As Grayscale and the team at Davis Polk & Wardwell have outlined, 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.”
Recall that Grayscale strengthened its legal staff by hiring Donald Verrilli, a top attorney from the Obama administration, at the beginning of June. The company was already considering the risk that the decision might not be in its favour at the time. Notably, Verrilli served as US solicitor general under the Obama administration from 2011 to 2016. He had acted as the government’s attorney in numerous Supreme Court matters.
Grayscale treads on legal waters
Grayscale made the decision to quickly traverse legal waters when the rejection order was issued. The CEO of Grayscale, Michael Sonnenshein, announced on Twitter that a lawsuit had been filed to contest the SEC’s judgement.
In his final statement, Sonnenshein said that Grayscale will keep using its “full resources” to fight for its shareholders’ rights and the “equitable regulatory treatment” of Bitcoin investment vehicles.