By George Ward
Several crypto exchanges in the United States have been longing to launch their Bitcoin exchange-traded fund (EFT), but the regulator has declined every bid. Accordingly, Grayscale Investment is currently challenging the Securities and Exchange Commission’s (SEC) resistance by going forward with its proposed Bitcoin ETF launch.
Grayscale Dares SEC over ETF
Amid its ongoing efforts to launch a crypto ETF product, Grayscale has initiated a legal battle against the SEC. It has been challenging the regulator’s denial order for its proposed crypto investment product since June 2022.
In a 73-page legal document filed on December 9 at the US Court of Appeals for the District of Columbia Circuit, the SEC provided reasons for its refusal to accede to Grayscale’s request.
According to the report, the SEC’s decision to bar Grayscale’s move to convert all its current Bitcoin Trusts into ETFs is due to the difference from the previous futures ETFs it has approved.
However, Grayscale responded by saying that the regulator’s disapproval order violated the guidelines of the Administrative Procedure Act. The crypto investment fund manager cited previous approvals by the SEC for firms to list and trade Bitcoin futures.
As expected, the SEC contested Grayscale’s position, arguing that the ETF products it previously approved comprised futures contracts that users could trade only on the Chicago Mercantile Exchange. The SEC added that the said exchange is registered with the Commodity Futures Trading Commission (CFTC) and functions under the supervision of regulatory agencies.
Meanwhile, SEC added that the Bitcoin spot market is a disjointed and highly unregulated space compared to other crypto-based investment tools. In addition, the regulator argues that the crypto investment fund platform has failed to support its argument that the Chicago Mercantile Exchange has enough surveillance to detect and stop fraud and manipulation, which are common in the Bitcoin spot market.
A Case of Selective Treatment?
Meanwhile, the crypto fund manager argues that the regulator needs to explain the different treatment of Bitcoin futures and Bitcoin spot ETFs it has been approving.
According to Grayscale, spot Bitcoin ETFs directly track the price of BTC, and it sees no reason why the SEC is unwilling to approve its request. As a result, the fund believes that the regulator’s denial order is biased and harmful to the market.
It is worth noting that the fund has been in business for nearly a decade and offers accredited investors a broad range of crypto-based investment products. Furthermore, Grayscale offers BTC investment by exposing investors to crypto assets as security without direct acquisition.
Since 2016, the fund manager has sought to convert its Bitcoin stash into an ETF. However, after launching its legal fight with the regulator, it has reiterated the reasons behind its decision.
Grayscale believes an ETF would provide investors with a broader pool of Bitcoin products and boost consumer protection.