- A legal brief was filed against SEC for rejecting Grayscale’s application to convert GBTC.
- Grayscale argued that the SEC’s application of its “significant market test” was deeply flawed.
- The brief states that SEC’s test is inconsistent with a discriminatory strictness to spot Bitcoin ETFs.
On Tuesday, the world’s largest digital currency asset manager, Grayscale filed its opening legal brief in a lawsuit against the U.S. Securities and Exchange Commission(SEC) for rejecting the conversion of Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF.
The legal brief was filed in the U.S. Court of Appeals for the District of Columbia Circuit. Earlier today, Grayscale shared the appellate phase timeline on Twitter:
The opening brief presents the legal fundamentals for Grayscale’s arguments. It all started when on June 29, 2022, the SEC rejected Grayscale’s application to convert GBTC to a spot ETF.
Following the denial, Grayscale Senior Legal Strategist, former U.S. Solicitor General, and partner at Munger, Tolles & Olson, Donald B. Verrilli, Jr., lodged a petition on the same day for review to begin with the legal process.
Thus, the opening brief summarises the reasons why the SEC’s contrasting action on these products was “arbitrary, discriminatory, and in excess of the Commission’s statutory authority.” Grayscale also called the SEC’s application of its “significant market test” deeply flawed since it doesn’t fulfill the intention of safeguarding investors against potential risks like fraud and manipulation in the Bitcoin markets.
It also argues that SEC’s test is inconsistent with a discriminatory strictness to spot Bitcoin ETFs. The brief thus states that even though Bitcoin may be a new asset, the legal issue is straightforward.
It is worth noting that the SEC has approved several Bitcoin futures ETFs recently. But when it comes to applications for ETFs that hold Bitcoin directly, or spot Bitcoin ETFs, like conversion of GBTC, SEC has repeatedly rejected such applications.
The brief emphasizes on how both Bitcoin futures and spot Bitcoin derive their prices depending on overlapping indices. Hence, the spot price of Bitcoin in each product is susceptible to similar risks as well as protections.
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