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Grayscale threatens to sue the SEC if its Bitcoin spot ETF is rejected

  • 3 min read
  • Latest
  • Grayscale CEO Michael Sonnenshein has revealed that all actions, including a lawsuit against the SEC, are on the table if the regulator fails to approve its spot ETF application.
  • He says that the SEC has lost sight of what its role is in regard to investor protection and believes that Grayscale has fulfilled all the obligations required of it.

By July 6, the Securities and Exchange Commission (SEC) will have to reveal whether it has approved or denied an application by Grayscale to convert its Bitcoin Trust into a spot exchange-traded fund (ETF). If the regulator chooses the latter, as it has done with several other applications, it could be on the receiving end of a lawsuit.

Grayscale CEO was on Bloomberg News where he discussed the current Bitcoin price and why it’s gone up in the past week, his company’s ETF application, and what the future holds for crypto.

Asked if Grayscale would consider filing an Administrative Procedure Act (APA) lawsuit against the SEC, Sonnenshein replied, “I think all options are on the table.”

The possibility of a lawsuit by the world’s largest crypto investment fund against the regulator isn’t far-fetched. In late November, Grayscale lawyers sent a letter to the regulator claiming that it was breaking the law by approving futures ETFs and denying spot ETFs.

The SEC was subjecting spot ETF applications to  “a different, vague and evidently impossible-to-meet standard,” the lawyers said, adding:

Doing so not only would be fundamentally unfair to BTC and its shareholders, but would violate the Section 6(b)(5) injunction against unfair discrimination among issuers, and constitute arbitrary and capricious administrative action in violation of the APA [Administrative Procedures Act].

Read More: Grayscale says SEC broke the law by rejecting Bitcoin spot ETF applications

Grayscale: SEC is losing sight of its goal – protecting investors

Grayscale is the biggest investment firm of its kind and the world’s single largest Bitcoin holder (after Satoshi of course). Its Grayscale Bitcoin Trust (GBTC) fund holds about $30 billion worth of BTC, with its other funds for altcoins holding about $10 billion in Ethereum, Solana, Avalanche, Litecoin, and more.

As Sonnenshein told Bloomberg, the company now boasts of having over 800,000 investors across all 50 states in the U.S. This has been a key reason behind its ETF application getting so much support from the public. Ever since the SEC opened its doors to feedback from the public on the application, it has received over 2,700 letters from investors, all in support of Grayscale.

Sonnenshein considers this support as the key to softening the SEC’s stance.

“…it’s important that between now and the end of that 240-day process which ends in early July, that the SEC hears from as many investors as possible, as well as academics, policymakers – everybody has an opportunity to weigh in on this issue,” he said.

The executive further criticized the SEC for neglecting its number one goal which is to protect investors.

GBTC today has been traded since 2015 and it’s been an SEC-reporting company since January of 2020, so every single day that it is trading and being bought and sold by investors and is not being folded into the familiarity and the protections of an ETF wrapper, we really don’t feel that the SEC is doing everything they can to actually protect investors.

Related: Huobi applies for a crypto ETF in Hong Kong as US SEC still says no to spot ETFs

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