According to Grayscale Investments, the U.S. In the case the crypto asset manager filed over the denial of its application for a spot bitcoin exchange-traded fund, the Securities Exchange Commission has submitted its first legal brief. The company stated:
"This is the next milestone in our ongoing litigation following the filing of our opening brief on October 11 and the supporting amicus briefs shortly after."
In an October opening brief, Grayscale's legal argument revolved around what it argued was an inconsistent application of law after authorities approved bitcoin futures that are related to spot market prices. The SEC rejected Grayscale's proposal to convert its flagship GBTC fund into an ETF in late June, and the company has said the failure affects its 850,000 investors who currently own shares in the trust.
With "no inconsistency in the Commission's disapproval of Grayscale's spot ETP while having approved two CME bitcoin futures ETPs," the SEC said in its 73-page response brief that their rejection was "reasonable, reasonably stated, and backed by significant evidence."
The SEC stated futures and spot-based bitcoin funds are "fundamentally different products."
The Scabrous Playing Field
SEC released in a statement:
"The Commission previously approved ETPs that hold only futures contracts that trade on the CME, which is registered with the CFTC; those ETPs’ underlying assets are thus subject to robust surveillance. The bitcoin spot market, by contrast, is fragmented and unregulated, and petitioner presented no supportable basis to conclude that the CME’s surveillance of futures trading would sufficiently detect and deter fraud and manipulation targeting the bitcoin spot market and thereby protect against fraud and manipulation in Grayscale’s product."
According to the SEC, its rejection of Greyscale's proposed ETF did not signify an improper, merits-based distrust about bitcoin as a financial asset.
In response to the SEC filing, Grayscale reaffirmed its claims from its opening brief and accused the SEC of creating an unequal playing field for investors by accepting Bitcoin futures-based ETFs, but continuously denying spot Bitcoin ETFs.
The firm noted that its subsequent brief is due on January 13 and final briefs are due on February 3. The company said they look forward to reviewing the SEC's brief response.
The price of GBTC versus the bitcoin it really holds hit an all-time low on Wednesday, with the discount ratio reaching 47.3%, according to data from The Block. Because shares do not give holders access to the underlying assets, the fund trades at a discount to its net asset value.