Grayscale Bitcoin Trust prepares oral arguments in latest tussle with SEC

Grayscale Bitcoin Trust is preparing for its latest legal challenge from the US Securities and Exchange Commission, which has long refused to allow the world’s largest Bitcoin investment vehicle to trade on the US stock market.

The struggling investment trust has been trying to go public as a spot ETF for years, but under chairman Gary Gensler, the SEC has firmly blocked Grayscale’s attempts at every step.

In particular, the SEC has raised concerns about possible market manipulation and fraud related to spot-based Bitcoin ETFs

In contrast, eligible futures-based bitcoin ETFs tend to be easier to set up because they are less regulated, as futures markets are generally more transparent and liquid than cash markets.

But Grayscale isn’t one to take no for an answer.

Most recently, in December 2022, the SEC thwarted Grayscale’s spot ETF ambitions by throwing down an appeal against the regulator’s previous decision.

Earlier in the year, Gensler scrapped Grayscale’s plans on the grounds that it would protect “investors and the public interest” because the proposal failed to explain how it was “designed to deter fraudulent and manipulative acts and practices.”

In a new petition filed in January 2023 in the US Circuit Court of Appeals, Grayscale called the SEC’s refusal “essentially arbitrary” and “illogical” given the SEC’s approval of Bitcoin futures contracts.

Grayscale said the SEC’s decision should be deemed illegal and should be overturned.

Table of Contents

Grayscale feels the heat

Grayscale, a subsidiary of cryptocurrency conglomerate Digital Currency Group, is under intense pressure from shareholders to fulfill its promise to convert the trust into a cash ETF, which would make it the first-ever company in the US.

Read  GoodFirms Unveils the Latest List of Industry-Specific Mobile App Developers from Worldwide: 2023

Due to the nature of the vehicle, shares are currently not redeemable, leaving investors with only one option if they wish to exit – to resell them to a willing buyer.

But with shares trading at a nearly 50% discount to underlying Bitcoin holders, there are few buyers willing to take them on.

Fir Tree Capital Management filed a lawsuit against Grayscale in December 2022 to get the trust to allow redemptions.

Grayscale faces legal action over its $10.7 billion bitcoin trust

Grayscale’s arguments against the SEC converting GBTC into a spot bitcoin ETF are scheduled for March 7, 2023 in the District of Columbia Court of Appeals.

Donald B. Verrilli, Jr., former US Solicitor General, partner at Munger, Tolles & Olson and Grayscale Senior Legal Strategist, will represent Grayscale during the hearings.


Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button