Grayscale is looking to sue the Securities and Exchange Commission (SEC) after its application for a Bitcoin ETF was rejected
SEC Rejects Grayscale Bitcoin ETF
After the SEC rejected a request to turn Grayscale Investments’ Bitcoin trust into an exchange-traded fund, the company said it had filed a lawsuit.
Late on Wednesday, Grayscale’s CEO, Michael Sonnenshein, tweeted that the company had filed a complaint against the regulator in the United States Court of Appeals for the D.C. Circuit.
The company’s request to transform its Grayscale Bitcoin Trust (GBTC) into the first ETF based on the largest cryptocurrency in the world was rejected by the SEC on Wednesday. The regulator decided that NYSE Arca’s strategy for the product wasn’t sufficient in thwarting fraud and manipulation.
An email request for comment that was received after regular business hours did not immediately receive a response from the SEC.
Grayscale, which submitted its plan in October, had made hints that it would file a lawsuit if the application was denied for months.
Continous Problem For GBTC
An ongoing problem for Grayscale would have been resolved by turning GBTC into an ETF: the trust’s significant discount on its underlying holdings. GBTC shares cannot be issued and redeemed to meet fluctuating demand, unlike an ETF.
As a result, GBTC is now basically a closed-end fund, with a price that is 28 percent below its net asset value.
At a meeting with American authorities in May, the investment company claimed that transforming into an ETF would provide up to $8 billion in value for investors.
Donald Verrilli, a lawyer at Munger, Tolles & Olson who is representing Grayscale, said in a statement that by rejecting the application, the SEC had violated federal law by “failed to apply uniform treatment to identical investment vehicles.”
