Grayscale CEO Says “SEC Is Acting Arbitrary And Capricious”

Grayscale CEO Says SEC Is Not Applying Uniform Treatment to Identical Bitcoin ETFs. Sonnenshein throws more light on why Grayscale chose to sue the SEC. 

In light of the lawsuit filed against the Securities and Exchange Commission by Grayscale, Michael Sonnenshein, CEO of Grayscale, has accused the SEC of exhibiting an “arbitrary and capricious behavior” via its method of regulation.

Sonnenshein said in a CNBC Squawk Box interview today that the Securities and Exchange Commission has continuously denied spot-based Bitcoin exchange-traded funds (ETFs) while approving futures Bitcoin ETFs.

Last night the SEC rejected Grayscale’s bid for a #Bitcoin ETF. Today, Grayscale responded with a lawsuit. @Grayscale CEO Michael Sonnenshein joins:

“The SEC is acting arbitrary and capricious,” says @sonnenshein. pic.twitter.com/cAEPQ4ipOB

— Squawk Box (@SquawkCNBC) June 30, 2022

“When you look at the Administrative Procedure Act and the Securities Exchange Act of 1934, which governs the way regulators have to govern, [spots and futures ETFs] have to be treated alike, but in this case they are not,” Sonnenshein was quoted as saying.

The company’s exec noted that the SEC is discriminating against issuers, including Grayscale, which has done everything to introduce new financial instruments “into the United States regulatory perimeter.”

Grayscale CEO’s comments echo those made earlier today by the company’s senior strategist lawyers and former U.S. solicitor general Donald B. Verrilli Jr., who said the SEC is violating the 1934 Administrative Procedure Act.

Grayscale Sues SEC Amit Bitcoin ETF Rejection

The development comes less than 24 hours after Sonnenshein announced that Grayscale had filed a lawsuit against the SEC in the U.S. Court of Appeals for the District of Columbia, challenging the agency’s decision to deny its spot-based Bitcoin ETF application.

Grayscale is poised to convert its flagship Bitcoin Fund (GBTC) to a spot BTC ETF following increased client demand.

However, all efforts to convert GBTC, which traded at a negative premium of 29% earlier today, have been pushed back by the SEC on numerous occasions.

This time, Grayscale took a more stringent approach by filing a lawsuit against the SEC with the hope that the agency would reconsider its ETF application.

A team of legal practitioners, including Verrilli Jr., and other attorneys at the law firm Davis Polk & Wardwell are heading the Grayscale legal team in the lawsuit.

SEC Continually Denies Grayscale’s Bitcoin ETF Application

It is noteworthy that since 2013 when Grayscale launched, the company has filed a series of Bitcoin ETF applications, but the SEC has continued to deny the requests.

The SEC has asserted that it is bent on protecting U.S. investors from the risks associated with cryptocurrencies.

However, the agency did not seem to consider investors’ protection when it approved futures-based Bitcoin ETFs, including the Bitcoin ETF offered by Valkyrie Investments.

The agency’s regulatory approach prompted Grayscale to accuse the SEC of not applying uniform treatment to identical investment vehicles.

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