Bitcoin ETF Spot Exchange Rejected, Grayscale Sued SEC?

• SEC concluded that NYSE Arca has not fulfilled its requirement under the Exchange Act.
• 11400+ submissions to SEC have been done by Grayscale.

On Wednesday, the U.S. Securities and Exchange Commission (SEC) refused Grayscale’s, one of the world’s largest digital asset managers, application to convert its Grayscale Bitcoin Trust (GBTC) vehicle to a spot bitcoin exchange-traded fund (ETF) on the NYSE Arca exchange.

Grayscale responded by filing a lawsuit against the decision and the rejections of proposals for spot bitcoin ETF. The company had sued the regulator and claimed that the SEC had broken both the Administrative Procedure Act and the Securities Exchange Act.

Michael Sonnenshein CEO of Grayscale said;

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.

SEC Rejection on Grayscale 

The Commission comes to the conclusion that NYSE Arca has not fulfilled its requirement under the Exchange Act and the Commission’s Rules of Procedure to ensure that its proposal meets with Exchange Act Section 6(b)(5) standards. 

SEC commission stated that;

The rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.

The SEC’s decision to reject Grayscale Investments’ request to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF has been reviewed by lawyers for Grayscale Investments in a petition filed with the District of Columbia Circuit. 

Last year November, Grayscale submitted an application to get its GBTC assets to a spot Bitcoin ETF. This July 2022, is the 240-day final period for the review conclusion. In effect, the company will argue that the SEC must approve products that are similar to those currently on the market, in this case, bitcoin futures ETFs.