Grayscale Could Sue SEC if Spot Bitcoin ETF Application is Rejected

Grayscale Investments CEO has said that the company could consider taking legal action against the U.S. Securities and Exchange Commission (SEC), if the commission fails to approve its spot Bitcoin exchange-traded fund (ETF) application. 

Grayscale CEO Considering Legal Action  Over Bitcoin ETF Rejection 

In an interview with Bloomberg on Monday (March 28, 2022) Michael Sonnenshein, CEO of the world’s largest digital currency asset manager, was asked whether Grayscale would consider the option of an Administrative Procedure Act (APA) lawsuit if the SEC rejects its spot Bitcoin ETF application. Sonnenshein responded by saying “I think all options are on the table.”

Grayscale first filed an application with the securities regulator to convert its Grayscale Bitcoin Trust (GBTC) to a spot-based Bitcoin ETF in October 2021. Later in December,  the SEC extended its decision concerning Grayscale’s application to February 2022. 

The American regulator made another extension is February, setting the new date for an approval or rejection of Grayscale’s spot Bitcoin ETF application to July 6, 2022. 

Meanwhile, Sonnenshein said that between now and July, investors should communicate more with the SEC in response to the agency’s request for public comments. Earlier in February 2022, Grayscale CEO launched an advocacy campaign asking U.S. investors to convince the SEC to approve a spot BTC ETF.

According to the Grayscale chief, there are more than 800,000 accounts across the 50 states in the U.S. that own GBTC, adding that these investors are “waiting patiently to have it converted into an ETF.” Sonnenshein buttressed that investors’ participation is important as the SEC weighs whether or not to approve the company’s application. 

Futures Bitcoin ETF Does Not Solve SEC’s BTC Concerns 

The SEC has been reluctant to approve a spot Bitcoin ETF, citing market manipulation and fraud as some of its reasons. The securities agency has rejected such proposals from Fidelity, Valkyrie, Kryptoin, SkyBride, and recently New York Digital Investment Group (NYDIG) and Global X. 

However, the regulator seems to favor a futures-backed Bitcoin ETF, which is believed to be a better option for investors. Back in August 2021, SEC Chairman Gary Gensler said that the agency would welcome ETF applications tied to Bitcoin futures. 

Since Gensler’s statement, the SEC has approved futures BTC ETF proposals from ProShares, Valkyrie, and VanEck. 

Meabwhile, Sonnenshein in his Bloomberg interview said:

“It was really a very exciting announcement that we now have a Bitcoin Futures ETF out in the market, but unfortunately that has forced investors into those Bitcoin futures products, because those are the only ones that exist.”

In a separate interview with CNBC, the CEO said that favoring a futures-based Bitcoin ETF “does not solve any of the underlying concerns that the SEC may have about Bitcoin.” Sonnenshein went on to say that the Commission should do what is right, ensure investors’ protection, and allow both futures and spot Bitcoin ETF products to exist in the U.S. market.

However, it remains to be seen if the SEC will finally approve a spot Bitcoin ETF in the United States, this time, from Grayscale, or if the company will join the SEC’s rejection list. However, Sonnenshein seems optimistic, stating that “it’s a matter of when, not a matter of if, a spot Bitcoin ETF is approved.”