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Grayscale Launches Lawsuit Against SEC Following Bitcoin Spot ETF Bid Rejection

Grayscale has filed a lawsuit against the Securities and Exchange Commission (SEC) after the regulatory agency rejected its Bitcoin (BTC) spot ETF bid. The leading crypto asset management and investment services company filed its petition with the US Court of Appeals for the District of Columbia Circuit.

According to Grayscale CEO Michael Sonnenshein, the SEC has no reasonable basis for turning down its Bitcoin spot ETF bid. Sonnenshein also stated that Grayscale was “deeply disappointed” and “vehemently disagrees” with the SEC’s decision.

More on Grayscale Lawsuit Against SEC

Grayscale had been hoping to convert its largest BTC fund, dubbed the GBTC vehicle, into an exchange-traded fund (ETF). Several crypto bulls also hoped that the SEC would finally approve the first spot BTC ETF in the US. However, On Wednesday, the Commission rejected Grayscale’s application, citing the asset manager’s failure to provide satisfactory answers to its query. According to the SEC, Grayscale did not comprehensively answer concerns about market manipulation. As a result, the regulatory agency fears that investors would not have sufficient protection under Grayscale’s proposed initiative.

Grayscale initially filed to turn its Grayscale Bitcoin Trust into an ETF last October. However, the ruling faced multiple delays, during which the crypto asset manager ramped up the pressure on the SEC. Grayscale also provided the public with an easy way to send emails to express their support. However, following the SEC’s rejection, Grayscale senior legal strategist Donald B. Verrilli Jr filed a petition challenging the decision. According to Verrilli Jr, also a former US solicitor general:

“[The SEC] is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”

In addition to Verrilli Jr, a team of attorneys at law firm Davis Polk & Wardwell are also leading the Grayscale litigation.

Dispute with SEC Far from Over

The SEC’s decision comes a week before the July 6th deadline. Furthermore, it also comes on the same day that the regulatory agency similarly rejected Bitwise’s Bitcoin exchange-traded product (ETP).

In addition to expressing strong disapproval of the SEC’s decision, Grayscale’s Sonnenshein remains committed to championing the spot ETF cause. As the company’s CEO put it:

“We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles.”

However, Grayscale’s resolve to resolve the matter with the SEC may not materialize anytime soon. Bloomberg Intelligence ETF analyst James Seyffart explained that despite the lawsuit, a court ruling is at least a year away. Seyffart predicts that the court ruling may happen somewhere between Q3 2023 to Q1 2024.

Meanwhile, BTC continues to trade lower, and is currently changing hands at $19,303.77 as of press time.

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Grayscale Launches Lawsuit Against SEC Following Bitcoin Spot ETF Bid Rejection