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Following a decisive court victory, Grayscale sent a letter to the Securities and Exchange Commission (SEC) on Tuesday outlining key points for the regulator as it determines its next steps.
Based on the court’s ruling, Grayscale emphasized that the commission has exhausted its reasons for continuing to deny the launch of a Bitcoin spot ETF.
No More Options for the SEC
In a comment letter published on Tuesday, Grayscale urged the SEC to “move expeditiously” toward approving spot ETFs, arguing that the agency has “no grounds” to treat spot Bitcoin ETFs differently from futures-based ETFs.
“If any other reason could be offered in attempting to differentiate spot bitcoin ETPs from bitcoin futures ETPs… we are confident that it would have surfaced by now in one of the fifteen Commission orders that rejected spot bitcoin filings,” wrote Grayscale.
Grayscale’s lawsuit against the SEC alleged that the agency was acting “arbitrary and capricious” by seemingly favoring Bitcoin futures ETFs over spot ETFs.
While the SEC argued that the Bitcoin futures market carried different risks than the spot market, the court ruled that the agency was being “unreasonable” by “discounting the obvious financial and mathematical relationship between the spot and futures markets.”
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The company also noted that its application to convert its Bitcoin Trust into a spot ETF has been pending for “nearly three times the length” of the maximum extension period the SEC is permitted to delay its approval or denial decision. Grayscale’s filing was submitted to the federal registrar on November 8, 2021, after which the SEC maximally delayed its decision until early July 2022.
Although the SEC officially denied the application on June 29, 2022, Grayscale’s subsequent lawsuit has resulted in the disapproval order being vacated. “We question whether a disapproval order that is later vacated in full by the Court of Appeals can fulfill the Commission’s obligation to act within the timeframe needed to avoid deemed approval,” wrote Grayscale.
Is A Spot Exchange Surveillance Agreement Necessary?
Assuming the SEC still has time to consider its decision, Grayscale emphasized that the agency continues to harm existing GBTC investors by delaying approval, and that investors at large strongly prefer spot ETFs over futures ETFs.
Furthermore, the company reminded the SEC that other recent spot ETF applicants are attempting to enter surveillance-sharing agreements with Coinbase to satisfy the agency’s requirements. Grayscale, which seeks a similar arrangement with the Chicago Mercantile Exchange (CME), claimed that the CME alone should be sufficient to gain approval.
“We believe the Commission may not now impose an additional, new requirement on spot bitcoin ETPs for a surveillance-sharing agreement with a spot bitcoin market,” it wrote.
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