In October last year, Grayscale submitted its documents to the SEC to convert its Bitcoin Trust into an ETF. After repeated expansions, the regulatory body issued a rejection order on Wednesday. At the same time, Grayscale’s application failed to answer the regulator’s questions about how it would prevent market manipulation and protect investors and public interests.
APA violation?
The SEC, as such, has yet to flash a green light to spot a Bitcoin ETF. However, it has already approved a handful of futures-based products. With the same argument in their stride, Grayscale sent a letter to the SEC in November last year. They claimed that the SEC, which approves future products, but not spots, was “arbitrary and fickle”. Greyscale also emphasized that the said prejudice could be described as a violation of the Administrative Procedure Act.
Grayscale’s senior legal strategist, Donald B. Verrilli, jr., Reiterated the same, saying:
“Thus, as Grayscale and the team at Davis Polk & Wardwell explained, the SEC fails to apply consistent treatment to similar investment vehicles and acts arbitrarily and erratically in violation of the Administrative Procedure Act and the Stock Exchange Act of 1934.”
Here, it is worth remembering that in early June, Grayscale appointed Donald Verrilli, a top-right lawyer from the Obama administration, to strengthen his legal team. At the time, the firm itself weighed the possibility that the decision would not be in its favor. Verrilli worked as a U.S. Attorney General, especially from 2011 to 2016, under the Obama administration. He has represented the government in a myriad of high court cases.
Grayscale follows a law course
After the rejection order was issued, Greyscale immediately chose to step on legal waters. Grayscale CEO Michael Sonnenshein took to Twitter to state that they had filed a lawsuit challenging the SEC’s decision.
In a recently issued statement, the CEO said:
“… we are deeply disappointed by and strongly disagree with the SEC’s decision to continue to mock Bitcoin ETFs for refusing to enter the US market.”
In Q1 this year, the regulatory agency opened its doors to community commentary and feedback on the conversion. It is not surprising that a majority of them [close to 95%] was in favor of Greyscale’s proposal. Sonnenshein expressed and added the same,
“Through the ETF application review process, we believe that US investors have overwhelmingly expressed a desire to see GBTC convert to a spot Bitcoin ETF, which would unlock billions of dollars in investor capital while the world’s largest Bitcoin fund continues in the US regulatory perimeter would bring.“
He concluded by stating that Grayscale would continue to use its “full resources” to advocate for its investors and the “fair regulatory treatment” of Bitcoin investment vehicles.