Crypto Asset Manager Grayscale Wins Litigation Against The SEC
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Grayscale, the world’s largest digital asset manager, secured a major win against the US Securities and Exchange Commission (SEC). The crypto asset manager sued the SEC for failing to approve its application to convert the Grayscale Bitcoin Trust (GBTC) into a listed spot Bitcoin ETF.
Grayscale wins against SEC
The SEC rejected Grayscale’s Bitcoin ETF applications over claims that the product could not “prevent fraudulent and manipulative acts and practices.” Grayscale sued the regulator over this ruling, and a judge has not overturned the SEC’s decision.
Judge Neomi Rao with the US Court of Appeals has ordered the SEC to accept Grayscale’s petition for a review. The judge has also said that the SEC’s order to deny the application be vacated. However, this order does not guarantee that the SEC will approve Grayscale’s Bitcoin ETF application.
The Grayscale Bitcoin Trust is the largest over-the-counter Bitcoin fund. It has more than $14 billion in assets under management. Earlier this year, GBTC shares traded at a near 50% discount to the net asset value. The plunge was attributed to the SEC’s denial of its ETF application and the financial woes facing its parent company, Digital Currency Group.
The SEC denied Grayscale’s application for a spot in Bitcoin ETF on June 29, 2022. Grayscale filed a petition with the US Court of Appeals for the District of Columbia Circuit. At the time, Grayscale’s CEO, Michael Sonnenshein, said the company was disappointed and disagreed with the SEC’s decision to deny the application.
Sonnenshein made a statement on X, formerly Twitter, on the company’s win against the SEC. He opined that the Grayscale legal team was reviewing the court’s decision. The executive also thanked investors for supporting the company.
Decisions on Bitcoin ETF applications nears
The court ruling on Grayscale’s litigation against the SEC comes as the decisions on several Bitcoin ETF applications near. The SEC faces the first deadlines to decide on 7 spot Bitcoin ETF applications.
The spot Bitcoin ETF application by investment firm Bitwise is set for a ruling on September 1. Blackrock, Invesco, Fidelity, VanEck, and Wisdomtree will await the SEC’s decision on their funds by September 2. Valkyries’ application is slated for a decision on September 4.
Bloomberg ETF analyst James Seyffart opined that the win by Grayscale has increased the chances of a positive outcome for the next batch of applications. However, the analyst noted that he remained uncertain when these applications would be approved.
The SEC has until mid-March next year to give a final decision on these ETF applications. In the meantime, it is possible that the regulator could delay the upcoming decisions.
The SEC Chair, Gary Gensler, is now facing criticism from US lawmakers following the Grayscale win. The House Financial Services Committee chair, Patrick McHenry, has said that the recent ruling stressed why the US needed a robust crypto regulatory framework.
