Grayscale Sued The SEC After Failure To Approve Their Proposed BTC Spot ETF

Grayscale Investments has filed a lawsuit against the United States SEC (Securities and Exchange Commission) less than an hour after the SEC denied its application to convert the Grayscale Bitcoin Trust product to an ETF. Lately, the SEC has been facing considerable backlash following its alleged anti-crypto attitude, which also previously included the infamous lawsuit against Ripple (XRP).

What happened?

Essentially, a spot Bitcoin (BTC) ETF is made up of the flagship crypto or assets related to the price of BTC itself. The SEC turned down Grayscale&39s application after referencing concerns regarding market manipulation, Tether&39s role in the larger crypto ecosystem, and the apparent lack of any kind of reliable surveillance-sharing agreement between a regulated exchange and a significantly-sized regulated market.

The SEC also echoed concerns brought forth by the regulator in rejecting other spot BTC ETF applications for many years now. However, although the SEC maintains its stance on ETFs, a vast majority of the crypto community believes that this is just the latest attempt by the agency to undermine the cryptocurrency industry and impose total control over the burgeoning digital space.

More than meets the eye?

Grayscale essentially requested that the SEC&39s order be reviewed by the United States Court of Appeals for the District of Columbia Circuit in its filing. The investment firm stated earlier this year that it was prepared to file a lawsuit against the SEC if its application was denied, stating that it would register a proceeding via the Administrative Procedures Act. In order to do this, Grayscale hired former Solicitor General Don Verrilli, who has experience in APA deliberations.

Grayscale CEO Michael Sonnenshein stated that Grayscale encourages and acknowledges the SEC&39s obligation to safeguard investors, preserve fair, orderly, and effective markets, and last but not least facilitate capital formation. However, he continued, Grayscale is extremely disappointed and strongly disagrees with the SEC&39s decision to keep denying spot BTC ETFs access to the U.S market.

What comes next?

Only a few Bitcoin futures ETFs have been authorised for trading so far. Spot BTC ETFs trade on the price of the flagship cryptocurrency, whereas futures-based BTC ETFs trade on the price of CME&39s BTC futures product which would also be linked to an index. Furthermore, proponents of Bitcoin ETFs claim that futures markets are still largely dependent on the underlying spot BTC price, whereas the SEC points out that CME&39s futures market is regulated via the CFTC (Commodity Futures Trading Commission).

Ultimately, time will tell as to which direction the SEC will head in as the crypto, blockchain and DeFi sector continues to skyrocket in terms of popularity and usage around the world.