Grayscale files suit against SEC following rejection of GBTC conversion bid

Crypto asset management firm Grayscale Investments has filed a lawsuit against the Securities and Exchange Commission, the United States regulator.

The company announced on June 29 that it would challenge a decision by the watchdog to deny its bid to convert the Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund.

The SEC had announced that decision earlier the same day.

In a statement, Grayscale’s CEO Michael Sonnenshein said: “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.”

“Through the ETF application review process, we believe American investors overwhelmingly voiced a desire to see GBTC convert to a spot Bitcoin ETF, which would unlock billions of dollars of investor capital while bringing the world’s largest Bitcoin fund further into the U.S. regulatory perimeter,” he continued. “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.”

Founded in 2013, Grayscale today manages some $13 billion in assets through its GBTC vehicle — which at its height had more than $42 billion in assets, according to The Block Research data.

The trust, which is supposed to track the price of bitcoin, is currently trading a 29% discount to its net asset value (NAV).

In its announcement today, Grayscale said that its comment letter campaign during the 240-day review period saw over 11,400 submissions to the SEC, with more than 99% in support of its bid to convert GBTC into an ETF.

“As Grayscale and the team at Davis Polk & Wardwell have outlined, 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,” said Donald B. Verrilli, Jr., Grayscale’s senior legal strategist and former US solicitor general, in a statement.