Digital asset manager Grayscale has taken another step in its legal battle against the United States Securities and Exchange Commission (SEC) over the rejection of a spot Bitcoin exchange-traded fund (ETF). In a letter filed on July 10, Grayscale’s legal team informed the U.S. Court of Appeals for the District of Columbia Circuit about the listing of Volatility Shares Trust’s leveraged Bitcoin (BTC) futures ETF, presenting it as a potential precedent in support of their case.
Grayscale’s move comes after the Volatility Shares ETF began trading on June 27 without any interference from the SEC. This is notable because the SEC has yet to approve any spot crypto ETFs, only those tied to BTC futures. Grayscale argues that the approval of the leveraged Bitcoin futures ETF demonstrates the SEC’s arbitrary approach in treating spot Bitcoin ETFs differently.
The asset manager initially filed a legal challenge against the SEC in June 2022 after the commission denied an application to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF. Grayscale’s legal team cites the Volatility Shares ETF as an indication that the SEC’s treatment of spot Bitcoin ETPs is unfair and calls for the approval of proposed spot Bitcoin ETPs like Grayscale’s to level the playing field.
In their letter, Grayscale’s lawyers stated, “The only way to eliminate the Commission’s unequal treatment of bitcoin-based ETPs is to allow proposed spot bitcoin ETPs like Grayscale’s to begin trading.”
Grayscale is not the only firm seeking approval for spot crypto ETFs from the SEC. BlackRock, the largest asset management company in the world, and ARK Investment Management have also filed applications. In a recent report, SEC officials claimed that the crypto ETF filings were not “sufficiently clear and comprehensive.” As a response, some applicants, including BlackRock, have refiled their applications to include cryptocurrency exchange Coinbase as a surveillance partner to address the SEC’s concerns.
The battle for a Bitcoin ETF has been ongoing for years, with many market participants eagerly awaiting its approval. A Bitcoin ETF could potentially open the floodgates for institutional investors and retail traders to gain exposure to Bitcoin through regulated and traditional investment channels. It would provide a simpler and more familiar way for investors to gain access to Bitcoin’s price movements without needing to directly hold or manage the cryptocurrency.
Grayscale’s challenge against the SEC is significant as it seeks to establish a fair playing field for spot Bitcoin ETFs. The outcome of this lawsuit could impact the future of crypto ETFs and potentially influence the SEC’s approach towards digital assets. As the crypto industry continues to evolve, regulatory clarity and approval of financial products like ETFs will play a crucial role in bringing cryptocurrencies into mainstream finance.
Investors and industry participants will be closely watching the developments in Grayscale’s lawsuit and hoping for a favorable outcome that could pave the way for the eventual approval of spot Bitcoin ETFs.