Grayscale Investments is taking the US Security and Exchange Commissions to court after the regulatory body denied its application to convert Grayscale Bitcoin Trust (OTCQX: GBTC) to a spot Bitcoin ETF.
“Grayscale supports and believes in the SEC’s mandate to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation — and we are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market,” said CEO Michael Sonnenshein.
The SEC rejected on Wednesday Grayscale’s application, highlighting concerns about market manipulation. It purported that the proposal lacks in ensuring protections for the investors.
Immediately hours after the decision was handed down, the digital asset manager announced the lawsuit.
Had it been approved, GBTC would be the first spot bitcoin ETF, potentially opening up the industry to more institutional investors. Crypto bulls had high hopes for a spot bitcoin ETF since the SEC has previously approved other bitcoin-based ETFs, which were futures market-oriented or short positions.
“It really is, in our opinion, a matter of when and not if,” Sonnenshein said in a CNBC interview before the SEC announced the decision. “If the SEC can’t look at two like issues, the futures ETF and the spot ETF, through the same lens, then it is, in fact, potentially grounds for an Administrative Procedure Act violation.”
In a Bloomberg piece published before the decision was announced, anchor Katie Greifeld wrote that the application was “going to lose,” citing two possible scenarios: SEC rejects the application based on concerns of potential fraud and manipulation–which is what happened; and Grayscale losing millions in revenue should the ETF be approved.
“In its current form, the Grayscale Bitcoin Trust (ticker GBTC) charges shareholders a 2% fee… A 2% fee would never fly in the ETF world… Take the ProShares Bitcoin Strategy ETF (BITO), which carries an expense ratio of 0.95%. That’s relatively expensive for an ETF, and it’s less than half of GBTC’s fee,” Greifeld wrote.
As the bitcoin investment fund manager continues the battle in court, should it get a spot bitcoin ETF approve, “it’s reasonable to think that other debuts would soon follow and the race to the bottom in costs would commence,” added Greifeld.
“[That] would mean saying goodbye to potentially hundreds of millions of dollars in revenue — a painful thing to do in the thick of crypto winter,” she added.
GBTC last traded at US$12.06, down 9.46% on the day.
Information for this briefing was found via CNBC, Bloomberg, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.