Lawyers representing crypto asset manager Grayscale Investments urged the Securities and Exchange Commission (SEC) to “expeditiously” approve a spot bitcoin exchange-traded fund (ETF) in a letter sent to the agency. Grayscale’s letter follows a unanimous ruling by a panel of the U.S. Court of Appeals for the D.C. Circuit Court on August 29 that vacated the SEC’s June denial of Grayscale’s application to convert its Grayscale Bitcoin Trust into an ETF.
Grayscale Pushes SEC for Spot Bitcoin ETF Approval, Citing Court Ruling and Investor Interests
In the letter, Grayscale’s lawyers state that there is no reason to differentiate between bitcoin futures ETFs, which the SEC has approved, and spot bitcoin ETFs like Grayscale’s proposed product. The law firms of Davis Polk and Munger Tolles & Olson penned the letter to the securities regulator.
The attorneys note that the SEC has rejected spot bitcoin ETF applications in 15 orders since approving bitcoin futures ETFs without articulating a rationale for treating the products differently. Following the reasoning of the D.C. Circuit Court, they say the SEC cannot now impose additional surveillance requirements on spot bitcoin ETFs beyond what is required for bitcoin futures ETFs.
The letter states:
Now that the Court of Appeals has spoken, there is no available rationale that would distinguish a bitcoin futures ETP from a spot bitcoin ETP under the legal analysis previously adopted by the Commission in rejecting spot bitcoin ETPs.
The letter points out that Grayscale’s ETF application has been pending for nearly three times the maximum period allotted for SEC action under securities laws. It questions whether the SEC’s June disapproval order, which the court vacated, fulfilled the agency’s obligation to act within required timeframes. The lawyers urge the SEC to approve the ETF application promptly in light of the latest court ruling.
Delaying approval, the letter argues, continues to unjustifiably harm Grayscale’s existing investors by causing its Bitcoin Trust shares to trade at a substantial discount to net asset value. It also imposes competitive harm by limiting investor choice. The lawyers contend that U.S. investors are being “forced into less efficient and more complicated product structures” by the lack of approved spot bitcoin ETFs.
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