Grayscale’s request for a spot Bitcoin ETF was denied by the SEC. After the US Securities and Exchange Commission rejected an application to turn its Bitcoin trust into an exchange-traded fund, Grayscale Investments announced that it has filed a lawsuit against the agency.
Late on Wednesday, Grayscale’s CEO, Michael Sonnenshein, tweeted that the company was suing the regulator, and the company confirmed that it had done so by filing a case in the US Court of Appeals for the D.C. Circuit.
The firm’s request to transform its Grayscale Bitcoin Trust into the first exchange-traded fund (ETF) based on the largest cryptocurrency in the world was rejected by the SEC on Wednesday. The regulator determined that NYSE Arca’s strategy to list the product wasn’t sufficient in preventing fraud and manipulation.
An email statement released that was received after normal office hours did not immediately receive a response from the SEC. Grayscale, which submitted its plan in October, had made hints that it would file a lawsuit if the application was denied for months.
The ongoing problem for Grayscale would have been resolved by turning GBTC into an ETF: the trust’s significant discount on its underlying holdings. GBTC shares cannot be issued and redeemed to meet fluctuating demand, unlike an ETF. As a result, GBTC is now basically a closed-end fund, with a price that is 28 percent below its net asset value.
Grayscale claimed that transforming into an ETF would provide up to $8 billion in value for investors at a meeting with US authorities in May. Donald Verrilli, a law partner at Munger, Tolles & Olson who is representing Grayscale, said in a statement that by rejecting the application, the SEC had violated federal law by “failing to apply consistent treatment to similar investment vehicles”
CEO of Grayscale Sonnenshein said in the statement, “We are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market.”
Image Credit: Shutterstock
Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.
