Grayscale Investments Lawsuit against the SEC surfaces again

Key Takeaways

  • In response to the Securities and Exchange Commission (SEC) rejecting its request to convert its Grayscale Bitcoin Trust (GBTC) into a spot-based Bitcoin exchange-traded fund, Grayscale Investments has filed a lawsuit against the SEC (ETF).
  • In response to the SEC’s decision to reject their application, CEO Michael Sonnenshein stated on Wednesday that they were “deeply disappointed” and “vehemently disagree.”
  • The court decision on the issue, according to experts, is not anticipated until 3Q 2023 to 1Q 2024, which suggests that the GBTC may not proceed any time soon.

One of the largest digital currency asset managers in the world, Grayscale Investments, confirmed recently that its Senior Legal Strategist, Donald B. Verrilli, Jr., a former U.S. Solicitor General and partner at Munger, Tolles & Olson, filed a petition for audit with the United States Court of Appeals for the District of Columbia Circuit questioning the Securities and Exchange Commission’s (SEC) decision to refuse conversion of Grayscale Bitcoin Trust (GBT).

The SEC’s decision to reject Grayscale Investments’ request to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF has been contested by attorneys for Grayscale Investments in a petition filed with the District of Columbia Circuit.

In November of last year, Grayscale submitted an application to have its GBTC product converted to a spot Bitcoin ETF. This July 2022 marks the end of the 240-day final term for the review’s consideration. Michael Sonnehshein, CEO of Grayscale, commented on the most recent denial.

Grayscale is profoundly disappointed and vehemently disagrees with the SEC’s decision to keep preventing spot Bitcoin ETFs from entering the U.S. market. Grayscale claims to support and chooses to believe in the SEC’s duty to protect investors, preserve fair, orderly, and productive markets, and facilitate capital formation.

“We believe that American investors strongly expressed a desire for GBTC to become a spot Bitcoin ETF during the ETF application review process, which would free up billions of dollars of investor capital while bringing the largest Bitcoin fund in the world closer to the U.S. regulatory border. We’ll keep using all of the firm’s resources to fight for the rights of our investors and fair regulatory treatment of Bitcoin investment vehicles.”

Grayscale has been working to develop GBTC, the largest Bitcoin investment vehicle in the world, since 2013. In order to give investors more information and subject these products to more SEC scrutiny, Grayscale consciously filed enrollment statements with the SEC.

In addition, Grayscale has been proactive for years in giving investors full disclosures and risk information about GBTC and its wide range of cryptocurrency investment products.

Given the SEC’s history of turning down significant applications, it is clear that the securities regulator is not in favour of this investment product entering the market. Furthermore, in light of significant market insolvencies and liquidity problems, the SEC is likely to tighten its regulatory control over the cryptocurrency industry.

A record-breaking 11,400+ comment letters were submitted to the SEC as a result of Grayscale’s initiative during the 240-day review period, with over 99.0% of them supporting the conversion.

While the lawsuit has been filed, a court decision on the matter is not anticipated until 3Q 2023 to 1Q 2024, meaning that the GBTC may not be implemented any time soon, according to James Seyffart, an ETF analyst at Bloomberg Intelligence.

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Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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