Grayscale Legal Officer: Bitcoin ETF Litigation Might Last Two Years

Grayscale’s chief legal officer, Craig Salm, recently discussed the asset manager’s legal fight with the SEC regarding the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

Grayscale Endeavors for a Spot Bitcoin ETF

Asset management companies continue to advocate for a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States, despite regulators’ skepticism.

Asset manager Grayscale’s chief legal officer Craig Salm discussed the company’s litigation with the United States Securities and Exchanges Commission (SEC) over the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

Salm elucidated the foundation of Grayscale’s case against the SEC while answering the most frequently asked questions about the lawsuit. The legal officer states that the SEC’s move to reject the spot Bitcoin ETF establishes a clear separation between futures trading and spot trading in Bitcoin ETFs and draws a distinction between the two.

Grayscale, on the other hand, claims that the differences have no bearing on Bitcoin ETF approvals because both futures and spot Bitcoin ETF prices are based on the very same spot Bitcoin markets.

As a result, the Grayscale legal team thinks that the rejection of spot Bitcoin ETFs while approving Bitcoin futures ETFs is “unfair discrimination.” According to Salm, this is a violation of multiple laws, including the Administrative Procedure Act and the Securities Exchange Act of 1934.

Having laid out Grayscale’s case, Salm addressed the burning question on the minds of the public following the lawsuit: when will a spot Bitcoin ETF be approved?

Responding to it, Salm noted:

“We can’t be certain about timing, but based on how long federal litigation tends to take – including briefings, oral arguments, and a final court decision – it can typically take anywhere from twelve months to two years, but could be shorter or longer. However long it takes, we believe the strength of our arguments should result in a final decision in our favor at the D.C. Circuit Court of Appeals.”

Grayscale’s Two Legal Options if SEC Wins

When Grayscale filed a legal challenge against the SEC, the community rallied around the company. Many were dismayed by the decision to reject the spot Bitcoin ETF while authorizing a short Bitcoin ETF. Grayscale’s Bitcoin Trust (GBTC) saw a significant discount of roughly 35% after the SEC’s rejection, according to data released from YCharts.

In a recent interview, Grayscale CEO Michael Sonnenshein stated:

“We were simply asking the SEC to hold this product to a higher standard, to give it greater investor protection and give greater risk disclosure for investors.” He then added that “converting would unlock billions of dollars of unrealized shareholder value.”

The lawsuit has now reached the Appellate Court. In the event of a loss at this level, Grayscale would have two options. The first option is to request an “en banc” hearing. The second approach is to file an appeal with the United States Supreme Court.

This year’s crypto market has seen a harsh correction, and regulators are expected to be more scrutinizing. However, as the market matures, we anticipate the SEC becoming more comfortable with authorizing a spot Bitcoin ETF.