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Policy & Regulation

Grayscale Bitcoin ETF request rejected by SEC: Proceeds with lawsuit

30 Jun 2022 : 05:01
2 min read
  • SEC rejected Grayscale's application for conversion of GBTC to BTC spot ETF
  • The firm's Senior Legal Strategist Donald B. Verrilli, Jr. filed a lawsuit against the SEC
  • The lawsuit has been filed with the United States Court of Appeals for the District of Columbia Circuit

The application for the conversion of GBTC into a Bitcoin spot ETF initiated by Grayscale Investments, a global digital asset management firm founded in 2013, in October 2021 has been finally rejected by the United States Securities and Exchange Commission (SEC) after a prolonged delay.

SEC’s rejection

The financial authority that regulates securities in the US has finally put down the hopes of having a Bitcoin spot ETF trading in the US stock markets. As per the regulatory authority, Grayscale did not present the “means to prevent fraudulent and manipulative acts and practices sufficient to justify dispensing with the detection and deterrence of fraud and manipulation that is provided by a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin.”

The SEC further reject the application for Bitwise BTC spot ETF as well adding that almost every spot ETF applicant including Grayscale has failed to demonstrate the fact that “the bitcoin market as a whole or the relevant underlying bitcoin market is uniquely and inherently resistant to fraud and manipulation.”

In this context, it is important to note that the SEC recently approved the launch of the ProShares Short Bitcoin Strategy ETF.

Grayscale retaliates

Interestingly, Michael Sonnenshein, the CEO of Grayscale recently stated that “in our opinion, a matter of when and not if” hinting that the approval is round the corner. Following the rejection of the ETF, the firm’s Senior Legal Strategist, former U.S. Solicitor General, and partner at Munger, Tolles & Olson, Donald B. Verrilli, Jr., filed a lawsuit on behalf of the digital asset management firm against the SEC with the United States Court of Appeals for the District of Columbia Circuit.

“There is a compelling, common-sense argument here, and we look forward to resolving this matter productively and expeditiously,” said Verrilli.

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