Grayscale Seeks SEC Meeting to Push Spot Bitcoin ETF Approval

The crypto asset manager pushes forward after a landmark legal win against the SEC.

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Finance Reporter
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Reviewed by: Lisa Barr
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Edited by: Ron Day

Grayscale Investments is urging the SEC to approve its request to convert its bitcoin trust into an ETF and has asked the agency to meet with them as quickly as possible after a court ruled against the agency's refusal to review Grayscale’s application. 

The crypto asset manager delivered a letter on Sept. 5 to the regulator urging it to approve the conversion of the $16 billion Grayscale Bitcoin Trust into an exchange-traded fund.  

The letter sent by Grayscale’s lawyers argued that the filing to turn the Grayscale Bitcoin Trust into an ETF has been “pending for nearly three times the length permitted” for the SEC to act. It also sought to address security issues raised by the agency, saying that if safety differences between a spot bitcoin and currently available futures bitcoin ETFs existed, the firm is “confident it would have surfaced by now.” 

“There is no available rationale that would distinguish a bitcoin futures ETP from a spot bitcoin ETP,” according to the letter sent by attorney Joseph Hall of New York’s Davis Polk.   

Grayscale’s Court Victory Over SEC 

The request follows Grayscale’s watershed legal win over the agency on Aug. 29. The company had sued the SEC after the agency, which has to date not approved a spot bitcoin ETF, refused to permit the conversion of the Grayscale Bitcoin Trust into an ETF. Judges on the U.S. Court of Appeals D.C. Circuit last month sided with Grayscale and called the SEC’s decision “arbitrary and capricious.”  

The SEC has 45 days after the ruling to appeal.  

Investment managers from BlackRock Inc. to Fidelity Investments have pending spot bitcoin ETF applications in front of the SEC. Approval of the Grayscale application would open the door to their spot bitcoin ETFs being available to investors. 

While the regulatory body allows ETFs that track bitcoin futures contracts, it thus far has blocked firms from rolling out ETFs that track physical bitcoin, which is the product investors are vying for.  

The ProShares Bitcoin Strategy ETF (BITO) is by far the largest bitcoin futures ETF, which has $952 million in assets under management. The SEC has denied more than 30 spot bitcoin proposals since 2021. 

“GBTC is ready to operate as an ETF upon regulatory approval, and Grayscale and its investors look forward to more information from the SEC,” said a Grayscale spokesperson in the company’s statement on the letter.  

SEC Meeting With Grayscale

Grayscale is now seeking to meet with the SEC “as soon as practical” to “discuss the way forward in view of recent developments,” according to the letter.  

An SEC spokesperson said the agency is “reviewing the next steps” after the Grayscale lawsuit decision.

Grayscale also argued that dragging out the approval process is hurting investors by pushing down the price of the trust. It also said that a spot bitcoin ETF is the least complicated and best product structure for bitcoin ETF investors. 

The firm also said that its security measures, known as surveillance sharing agreements, handled by the Chicago Mercantile Exchange, are as effective as other firms’ proposed agreements with Coinbase.  

Grayscale currently has one ETF, the Grayscale Future of Finance ETF (GFOF), which has $5.3 million in AUM.  

 

Contact Lucy Brewster at [email protected] 

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.