Brief argues SEC’s denial of Grayscale’s conversion of Grayscale Bitcoin Trust (GBTC) to spot Bitcoin ETF was arbitrary, capricious, and discriminatory
STAMFORD, Conn., Oct. 11, 2022 (GLOBE NEWSWIRE) — Grayscale Investments®, the world’s largest digital currency asset manager, today filed its opening legal brief in the U.S. Court of Appeals for the District of Columbia Circuit challenging the decision by the Securities and Exchange Commission’s (“SEC” or “the Commission”) to deny conversion of Grayscale Bitcoin Trust (BTC) (OTCQX: GBTC) to a spot Bitcoin ETF*.
The opening brief explains the legal basis for Grayscale’s arguments. On June 29, 2022, the SEC denied Grayscale’s application to convert GBTC to a spot ETF. The same day, Grayscale Senior Legal Strategist, former U.S. Solicitor General, and partner at Munger, Tolles & Olson, Donald B. Verrilli, Jr., filed a petition for review to initiate the litigation process.
Today’s brief outlines why the SEC’s disparate treatment of these products was arbitrary, discriminatory, and in excess of the Commission’s statutory authority; it also argues that the test the SEC has applied to Bitcoin-related ETFs, and only Bitcoin-related ETFs, is flawed and has been inconsistently applied with a “special harshness” to spot Bitcoin ETFs.
“Although Bitcoin may be a relatively new asset, the legal issue here is straightforward,” the brief explains.
In 2021 and 2022, the SEC approved several Bitcoin futures ETFs, but repeatedly rejected ETFs that hold Bitcoin directly, or spot Bitcoin ETFs, including Grayscale’s application to convert GBTC. The brief highlights that Bitcoin futures and spot Bitcoin both generate their price based on overlapping indices, so the spot price of Bitcoin in each product is subject to the same risks and protections.
“That stark arbitrariness cannot be justified or reconciled with the Commission’s mandate to treat like cases alike. Rather, it can be only understood as a substantive judgment on the merits of a spot Bitcoin investment — the kind of substantive judgment that is outside the Commission’s authority,” the brief reads.
“The Administrative Procedure Act and Exchange Act require rules and regulations to be applied without favoritism for one type of product or another,” said Craig Salm, Grayscale Chief Legal Officer. “Over 850,000 million Americans own GBTC – a product designed so that investors could have regulated access to investing in Bitcoin. On behalf of the U.S. investment community, we are proud of the arguments we have outlined in Grayscale’s opening brief, and we look forward to the Commission’s response.”
Amicus briefs in support of Grayscale are due to be filed by October 18, 2022. To stay apprised of additional litigation milestones and information, visit grayscale.com/gbtc-lawsuit.
*We use the generic term “ETF” to refer to exchange-traded investment vehicles, including those that are required to register under the Investment Company Act of 1940, as amended (the “‘40 Act”), as well as other exchange-traded products that are not subject to the registration requirements of the ‘40 Act.
About Grayscale Investments®
Grayscale enables investors to access the digital economy through a family of secure, regulated, and future-forward investment products. Founded in 2013, Grayscale has a proven track record and deep expertise as the world’s largest digital currency asset manager. Investors, advisors, and allocators turn to Grayscale’s private placements, public quotations, and ETFs for single asset, diversified, and thematic exposure. Grayscale products are distributed by Grayscale Securities, LLC (Member FINRA/SIPC) or Foreside Fund Services, LLC. For more information, please follow @Grayscale or visit grayscale.com.
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