Grayscale Investments filed a lawsuit Tuesday against the Securities and Exchange Commission for denying the conversion of its Grayscale Bitcoin Trust to a spot Bitcoin ETF.
The SEC first rejected Grayscale's application on June 29. And the firm immediately filed a petition to review the litigation process. In its opening brief, Grayscale says the decision was arbitrary, capricious and discriminatory.
The SEC approved multiple Bitcoin futures ETFs in 2021 and 2022, but has repeatedly rejected ETFs that hold Bitcoin directly. Grayscale says that Bitcoin futures and spot Bitcoin both generate their prices based on overlapping indexes. So the products would share the same risks and protections.
The brief argues that decision is a substantive judgment on the merits of spot Bitcoin investments, and such judgments are outside the SEC's authority.
"The Administrative Procedure Act and Exchange Act require rules and regulations to be applied without favoritism for one type of product or another," said Grayscale Chief Legal Officer Craig Salm.
He notes that over 850,000 Americans own GBTC, which allows investors to access and trade shares in trusts holding pools of Bitcoin. GBTC shares are intended to track the price of Bitcoin. And Grayscale believes that converting to a spot Bitcoin ETF would provide a more accurate picture of the holding's value.
GBTC Stock Performance
The Grayscale Bitcoin Trust first started trading in 2015 and currently has $12.1 billion in assets under management, according to Grayscale's website. GBTC stock hit its all-time high of $56.70 last February but has fallen roughly 67% so far this year.
GBTC shares rose 0.5% Thursday, trading around 11.27.
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