Grayscale Investments has filed a legal challenge against the Securities and Exchange Commission (SEC) after it denied an application to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF in place.
Grayscale files suit against SEC following the rejection of GBTC conversion bid
On June 29, they announced that their Senior Legal Strategist, former US Attorney General Donald B. Verrilli Jr. filed a reconsideration request with the United States Court of Appeals for the District of Columbia Circuit.
Verrelli stated that the latest decision shows that the SEC is acting “arbitrarily and erratically” due to “not applying consistent treatments to similar investment vehicles” and will pursue a challenge based on the SEC’s allegation of violating the Administrative Procedure Act (APA) and the Securities Exchange Act (SEA).
Grayscale Investments, which has $12.92 billion in assets under management in its GBTC, has been waiting for a decision from the SEC to convert its flagship Bitcoin fund into a spot ETF since filing with the regulator on October 19, 2021.
According to a filing from the securities regulator on June 29, the application was disapproved “to protect investors and the public interest” because the proposal failed to demonstrate how it is “designed to prevent fraudulent and manipulative acts and practices.” The decision was made a week before the July 6 deadline and came on the same day as Bitwise’s similar Bitcoin exchange-traded (ETP) product rejection.
Michael Sonnenshein, Grayscale’s CEO in a statement on Wednesday said they were “deeply disappointed” and “vehemently disagree” with the SEC’s decision to deny their application.
— Sonnenshein (@Sonnenshein) June 30, 2022
“We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles,” he said. Speaking to his 19,400 Twitter followers, James Seyffart, ETF analyst at Bloomberg Intelligence said that while the lawsuit has been filed, a court ruling on the matter is not expected until. Q3 2023 to Q1 2024, which means we may not see GBTC resume. early time.
Grayscale has prepared its legal team for a potential dispute with the SEC. Earlier this month, the company hired Donald B. Verrilli Jr., a former United States Attorney General to join its legal lineup. Other attorneys on Grayscale’s legal roster include attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm, who serves as a chief legal officer.
In March, Grayscale CEO Michael Sonnenshein told Bloomberg that his company would consider a lawsuit under the Administrative Procedure Act (APA) if its Bitcoin Spot ETF application was caught by the regulator financial manager refused.
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