Court to decide on Grayscale bitcoin ETF by Q3

abdelaziz Fathi

Grayscale CEO Michael Sonnenshein anticipates that the court may decide by the third quarter whether to overturn the SEC’s rejection of its application to convert its Bitcoin trust into a spot exchange-traded fund.  

Grayscale

Although Sonnenshein did not comment on whether he anticipates a favorable ruling, he said Grayscale will seek to appeal the decision up the Supreme Court if the case is unsuccessful. And if that also fails, the firm will discuss the possibility of getting relief from tender offer rules with the SEC. On the other hand, Grayscale plans to work closely with the SEC to expedite the conversion process if the decision comes in their favor, CEO reiterated at CoinDesk’s Consensus 2023 conference.

The crypto hedge fund told the court overseeing its lawsuit against the Securities and Exchange Commission that nothing justifies the agency’s arbitrary disapproval of the proposed spot-bitcoin ETP.

Replying to a brief filed by the SEC, Grayscale said that denying a proposal for a different spot bitcoin exchange-traded product is “illogical.”

The SEC has sent a letter to the U.S. Court of Appeals for the District of Columbia Circuit, notifying it of its recent order regarding the VanEck Bitcoin Trust. The letter states that the order addresses “relevant issues” related to the case, digging into the agency’s basis for denying Grayscale’s application to establish a Bitcoin ETF.

According to the attorney representing Grayscale, the SEC is using evidence and reasoning from the VanEck order, which is not part of the official record, in an attempt to justify its denial. This is known as “post hoc” reasoning, Verrilli said in a letter addressing the SEC’s recent order regarding the VanEck Bitcoin Trust.

He further argued that the VanEck order’s observation of a potential mixed or bi-directional relationship between bitcoin spot and futures prices does not disprove the 99.9% correlation that exists between these two markets. The letter stated that the SEC’s attempt to use the VanEck order to rationalize its decision regarding Grayscale’s bitcoin products is not permissible as it has not provided evidence that Grayscale’s claims are wrong.

Finally, the attorney pointed out that the SEC’s letter failed to acknowledge that the VanEck order was issued despite the dissent of two of its commissioners.

In June 2022, the company running the world’s biggest bitcoin fund sued the SEC after the agency rejected a bid to turn its investment vehicle into a fund that trades on major Wall Street exchanges.

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