The SEC recently met with Grayscale Investments to discuss its bid to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

According to a memo published by the SEC, the meeting took place between Grayscale principals including CEO Michael Sonnenshein and CFO Ed McGee, and officials from the SEC's Division of Trading and Markets. It concerned "NYSE Arca, Inc.’s proposed rule change to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E."

In October 2023, the U.S. Court of Appeals issued an order for the SEC to review Grayscale's spot Bitcoin ETF application, after the digital asset manager sued the regulator over its refusal to allow the conversion of GBTC into a Bitcoin ETF. The firm argued that the SEC’s judgment was "arbitrary and capricious," in light of its acceptance of similarly structured Bitcoin futures ETF products— an assessment with which the court’s judges unanimously agreed in August.

At the time, the court noted that the SEC lacked a coherent explanation for its refusal to approve the conversion. "The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP," the court opinion said. "In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful."


Grayscale submitted an S-3 filing with the SEC in October 2023, noting in a blog post that it was eligible to use the shorter filing instead of a form S-1 because "its shares have been registered under the Securities Exchange Act of 1934 since January 2020 and it meets the other requirements of the form." The asset manager also noted that it is "ready to operate as an ETF" upon receipt of regulatory approvals including NYSE Arca's 19b-4 application, an exemption or other form of Regulation M relief and the S-3 form being declared effective by the SEC.

Grayscale intends to list GBTC under the symbol GBTC on NYSE Arca, with the Bank of New York Mellon serving as the transfer agent for shares in the trust.

The Bitcoin ETF race

To date, the SEC has rejected all applications for a spot Bitcoin ETF, though the race heated up earlier this year when BlackRock, the world's largest asset manager, filed an application for a Bitcoin ETF. Earlier this month, an eight-day window in which the regulator could have approved all pending spot ETF applications closed, with the SEC set to revisit them in the new year.

Analysts from Bloomberg Intelligence and JP Morgan have estimated that the SEC will likely approve a spot Bitcoin ETF by early January.


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