The world's largest crypto asset manager Grayscale Investments has filed its opening legal brief challenging the U.S. Securities and Exchange Commission’s (SEC) decision to deny the conversion of its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

An exchange-traded fund (ETF) is an investing tool that bundles securities like stocks or commodities, allowing investors to buy shares on the public market without the need to directly own the underlying assets. In the case of a Bitcoin ETF, this underlying asset is Bitcoin, the world’s largest cryptocurrency.


Last October, the SEC allowed several Bitcoin futures ETFs offering derivative contracts that speculate on the future price of Bitcoin. Spot Bitcoin ETFs, which would be tied to Bitcoin's market price, however, are still not available to American investors.

In its filing with the U.S. Court of Appeals for the District of Columbia Circuit, Grayscale argued that “a fundamental norm of administrative procedure requires an agency to treat like cases alike.”

However, by greenlighting Bitcoin futures exchange-traded products (ETPs) while repeatedly rejecting Bitcoin ETFs backed by the actual underlying asset the financial regulator acted “in excess of statutory authority.”

“The Administrative Procedure Act and Exchange Act require rules and regulations to be applied without favoritism for one type of product or another,” Craig Salm, Grayscale's Chief Legal Officer, said in a statement.

The brief further stated that “although Bitcoin may be a relatively new asset, the legal issue here is straightforward.”

According to Grayscale, by failing to justify its “vastly different treatment” of Bitcoin futures ETFs and spot Bitcoin ETFs, the SEC “has violated the APA’s most basic requirements.”

Grayscale’s battle for a Bitcoin ETF

Grayscale has long sought to convert GBTC, the industry’s largest Bitcoin fund, into a spot Bitcoin ETF, arguing that it would help resolve the problem of the deepening discount the GBTC shares have been trading at since February last year.


In June this year, the Commission, however, rejected the firm’s application for a Bitcoin ETF, arguing that it did not do enough to protect investors from "fraudulent and manipulative acts and practices."

The decision prompted Grayscale to sue the regulator, with CEO Michael Sonnenshein stating at the time that the investment firm will continue to leverage all of its resources to advocate for its investors and the "equitable regulatory treatment of Bitcoin investment vehicles.”

Tuesday’s brief described the Commission’s decision as “arbitrary, capricious and discriminatory,” further stating that “there is simply no justification for continuing to inflict such serious investor harm."

According to Grayscale, the SEC must submit its brief by November 9, with Grayscale responding on November 30. Both parties are expected to submit a final brief on December 21.

Yesterday's filing also came hot on the heels of the SEC once again rejecting the launch of a Bitcoin ETF sought by asset management firm WisdomTree.

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