Grayscale, a digital asset manager, has filed an opening brief challenging the Securities and Exchange Commission’s (SEC) decision to deny Grayscale’s application to convert the Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin exchange-traded fund (ETF).
On Oct. 11, the world’s largest digital asset management firm filed its opening legal brief in the United States Court of Appeals for the District of Columbia Circuit, claiming the SEC’s action was “arbitrary, capricious, and discriminatory.”
Grayscale’s attorneys stated that numerous Bitcoin Futures ETFs previously approved by the SEC create values based on the same indices as the spot Bitcoin ETF.
They said that the SEC could not properly conclude that Bitcoin Futures ETFs do not take “the same risks in the same market” as spot Bitcoin ETFs.
“Although Bitcoin may be a relatively new asset, the legal issue here is straightforward. The Commission has violated the APA’s most basic requirements by failing to justify its vastly different treatment of Bitcoin Futures ETPs and spot Bitcoin ETPs.”
Grayscale also claimed that the SEC’s “significant-market test,” which determines if an exchange’s request to list an ETP is “designed to prevent fraudulent and manipulative activities and practises,” is “flawed,” and that the SEC “made the bar so high” that it could never be met.
Grayscale’s attorneys further pointed out that this significant-market test exclusively applies to Bitcoin-related ETPs, leading them to conclude that they had been discriminated against.
“Given that the Commission did not approve the Trust to trade as an ETP on the Exchange, the value of its shares cannot closely track the value of the Trust’s underlying Bitcoin assets— depriving Trust shareholders of billions of dollars in value.“
The filing in the United States Court of Appeals comes after the SEC on June 29 officially refused Grayscale’s attempt to convert GBTC to a spot Bitcoin ETF.
Grayscale initiated litigation on the same day by submitting a “Petition For Review.”
The SEC must submit its brief by November 9, according to Grayscale. Grayscale will next file a rebuttal brief on November 30 before both parties file a final brief on December 21.
Grayscale managed $26.4 billion in assets in March 2022.
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