Grayscale’s Message To The SEC After Winning In Court

After handily defeating the regulator in court, Grayscale sent a letter to the Securities and Exchange Commission (SEC) on Tuesday with key messages for the agency as it pursues next steps.

Given the court’s ruling, Grayscale emphasized that the commission has run out of reasons to continue denying the launch of a Bitcoin spot ETF.

No More Options for the SEC

Per Grayscale’s comment letter published on Tuesday, the firm encouraged the SEC to “move expeditiously” toward spot ETF approval, given that it has “no grounds” to treat spot Bitcoin ETFs differently from futures ETFs.

“If any other reason could be offered in attempting to differentiate spot bitcoin ETPs from bitcoin futures ETPs… we are confident that it would have surfaced by now in one of the fifteen Commission orders that rejected spot bitcoin filings,” wrote Grayscale.

Grayscale’s lawsuit against the SEC claimed that the agency was being “arbitrary and capricious” in seemingly favoring Bitcoin futures ETFs over spot ETFs.

While the SEC argued that the bitcoin futures market faced different risks from the spot market, the court ruled that the agency was being “unreasonable” through its “discounting of the obvious financial and mathematical relationship between the spot and futures markets.”

The company also highlighted that its filing to convert its Bitcoin Trust into a spot ETF has been pending for “nearly three times the length” as the SEC is allowed to extend its approval/denial deadline. Grayscale’s filing was published in the federal registrar on November 8, 2021, after which the SEC maximally delayed its decision until early July 2022.

Though the SEC officially denied the application on June 29 2022, Grayscale’s ensuing lawsuit has now left the disapproval order vacated. “We question whether a disapproval order that is later vacated in full by the Court of Appeals can fulfill the Commission’s obligation to act within the timeframe needed to avoid deemed approval,” wrote Grayscale.

Is A Spot Exchange Surveillance Agreement Necessary?

Assuming the SEC still has time to consider its decision, Grayscale emphasized that the agency continues to harm existing GBTC investors by delaying the approval and that investors at large strongly prefer spot ETFs over futures ETFs.

Furthermore, the company reminded the SEC that other recent spot ETF applicants are attempting to enter a surveillance-sharing agreement with Coinbase to satisfy the agency’s demands. Grayscale – which seeks a similar arrangement with the Chicago Mercantile Exchange (CME) – claimed the CME alone should be enough to gain approval.

“We believe the Commission may not now impose an additional, new requirement on spot bitcoin ETPs for a surveillance-sharing agreement with a spot bitcoin market,” it wrote.


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