Crypto Groups Mobilize Support for Grayscale Spot Bitcoin ETF Lawsuit Fight
Nicholas Otieno Oct 19, 2022 10:40
The groups have faulted SEC’s decision to disapprove applications of spot Bitcoin ETFs, yet the regulator had allowed similar, riskier products to enter the market.
Three trade groups representing a broad interest in the crypto industry on Wednesday filed a court brief supporting a Grayscale Investments lawsuit against the Securities and Exchange Commission (SEC) for rejecting the company's proposal for a spot Bitcoin exchange-traded fund (ETF).
The groups, which include the Blockchain Association, Chamber of Progress and Coin Center, and Chamber of Digital Commerce, filed the amicus brief in the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday. In their filing, the group argued that the SEC had firmly denied every application to list ETFs that hold Bitcoin, despite approving several ETPs holding Bitcoin derivatives.
The group stated that the SEC's denial of Grayscale's proposal to convert its flagship fund into an ETF violates the regulator's procedures. The group explained that despite the approval of multiple futures-based Bitcoin ETPs, the SEC has abandoned its investor protection mandate and abused its authority by denying every application for a spot-based Bitcoin ETP, including Grayscale's proposal.
The group said denying the applications is inconsistent with the Commission's treatment of similar products and "cuts against SEC regulatory and policy imperatives" by depriving consumers of a product that clearly satisfies regulatory requirements for listing on a national securities exchange.
The groups argued that there is strong consumer demand in the U.S. for Bitcoin exposure and Bitcoin ETFs offer safe, transparent choices for investors. The group claimed that the SEC has applied a double standard in universally disapproving applications to list spot Bitcoin exchange-traded products.
Crypto firms such as Blockchain Capital, Chainalysis, Goldman Sachs, Binance.US, and Fidelity are also included in the membership lists of the Blockchain Association, Chamber of Progress and Coin Center, and the Chamber of Digital Commerce.
In June, the SEC rejected Grayscale's application to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund, citing a failure by the investment manager to answer questions about concerns around market manipulation and lack of sufficient protections under the Grayscale proposal. Grayscale then filed a petition challenging the decision with the U.S. Court of Appeals for the District of Columbia Circuit.
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