Grayscale Bitcoin Trust, the first publicly traded bitcoin investment trust, sued the U.S. Securities and Exchange Commission for rejecting its application for a bitcoin exchange-traded fund (ETF).
The SEC has been reluctant to approve any spot ETF, citing, among other issues, concerns about market manipulation.
Grayscale Bitcoin Trust (GBTC) has long wanted to become an ETF, and is arguing that the SEC is acting “arbitrarily” and “capriciously.”
GBTC filed a lawsuit against the SEC on Monday, saying its decision to reject the ETF was “arbitrary and capricious.” In particular, the trust says there were two reasons for this: first, that there was no evidence that bitcoin markets were susceptible to manipulation; and second, that there were no safeguards in place to prevent market manipulation.
They recruited Donald B. Verilli Jr., a former Solicitor General of the United States, to help them with their legal position.
“Through the ETF application review process, we believe American investors overwhelmingly voiced a desire to see GBTC convert to a spot Bitcoin ETF,” Michael Sonnenshein, CEO of Grayscale, said in a statement. “This would unlock billions of dollars of investor capital while bringing the world’s largest Bitcoin fund further into the U.S. regulatory perimeter.”
As a direct result of the judgment made by the SEC, GBT share prices have fallen to an all-time low and are now selling at a discount of 35%. Regardless of what happens next, a sizable portion of the cryptocurrency community has been mobilized and brought together as a result of the denial and the accompanying litigation. Buckle up, people.
Grayscale wants an ETF, but what exactly is it?
With an exchange-traded fund (ETF), investors may purchase shares of a company on the open market without really owning the assets they’re investing in. The Securities and Exchange Commission (SEC) ultimately approved a Bitcoin futures ETF in October, which provides derivative contracts that enable investors to bet on Bitcoin’s future value. A Bitcoin spot ETF, which would be connected to the current price of Bitcoin, has not yet been approved by the SEC.
Currently, the Grayscale Bitcoin Trust has $12.9 billion under its care, according to Grayscale. Since February 2021, Grayscale Bitcoin Trust (GBTC) shares have traded at a discount to the value of the Bitcoins owned by Grayscale.
Grayscale Bitcoin Trust’s “discount” will be corrected, and the investment company will be able to charge reduced fees because of the change to a spot Bitcoin ETF.
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