Attorneys for Grayscale Investments, a cryptocurrency asset management firm, have formally petitioned the U.S. Securities and Exchange Commission (SEC) for a rapid approval of their proposed spot Bitcoin exchange-traded fund (ETF). The appeal to the SEC comes in the wake of a recent unanimous decision by a panel of judges from the U.S. Court of Appeals for the D.C. Circuit, dated August 29, which nullified the SEC’s prior refusal in June to transform Grayscale’s existing Bitcoin Trust into an ETF.
Grayscale Advocates for Immediate Approval of Spot Bitcoin ETF, Invokes Court Decision and Investor Welfare
The correspondence, drafted by the legal practices of Davis Polk and Munger Tolles & Olson, argues that there exists no basis for the SEC to distinguish between bitcoin futures ETFs, which have received the SEC’s blessing, and spot bitcoin ETFs such as the one Grayscale has put forth. It is underscored that the SEC has declined approval for spot bitcoin ETFs in 15 separate instances since green-lighting bitcoin futures ETFs, yet has not provided a coherent justification for the disparate treatment of the two types of products.
The lawyers underline that, following the logic of the D.C. Circuit Court’s recent decision, the SEC is not in a position to levy additional surveillance criteria on spot bitcoin ETFs that go beyond the standards set for futures-based bitcoin ETFs.
The Correspondence Asserts:
The appellate court’s judgment now renders untenable any logic that would create a legal distinction between a bitcoin futures exchange-traded product (ETP) and a spot bitcoin ETP, based on the SEC’s previous reasons for denying spot bitcoin ETPs.
The communication also highlights that Grayscale’s ETF application has been languishing for nearly triple the maximum duration that is statutorily allowed for SEC action, pursuant to securities regulations. It raises queries regarding whether the SEC’s June rejection, now overruled by the appellate court, met the commission’s mandate to act within the prescribed legal timelines. The attorneys exhort the SEC to expediently ratify the ETF application, particularly in light of the most recent judicial opinion.
The delay in securing approval, as argued in the correspondence, perpetuates undue financial detriment to current investors in Grayscale’s Bitcoin Trust by causing the shares to be traded at a significant markdown relative to their net asset value. It further imposes a competitive disadvantage by constraining the options available to investors. The legal representatives maintain that the absence of a sanctioned spot bitcoin ETF compels U.S. investors into less streamlined and more convoluted investment vehicles.