Grayscale Investments fired back with a letter of its own to the court that will decide its case against the SEC after the agency notified the court of its recent order denying a proposal for a different spot bitcoin exchange-traded product, a court filing Friday shows.
In a letter dated Wednesday to the U.S. Court of Appeals for the District of Columbia Circuit, the SEC said it was writing to notify the court of the commission's recent order relating to the VanEck Bitcoin Trust which "further addresses relevant issues."
Grayscale is suing the SEC over its June 2022 decision denying an application to convert the Grayscale Bitcoin Trust into a spot bitcoin exchange-traded product. In response to the SEC's letter, Donald B. Verrilli Jr., a partner with Munger, Tolles & Olson who represents Grayscale, sent a letter dated April 14, a Friday court filing shows.
"The VanEck Order demonstrates that the Commission continues to arbitrarily treat proposed spot-bitcoin ETPs differently from bitcoin-futures ETPs," Mr. Verrilli said in the letter. "Nothing about that order justifies the agency's arbitrary disapproval of the proposed spot-bitcoin ETP here."
First, the SEC points to evidence and reasoning in the VanEck order, which is outside the record, to attempt to rationalize the Grayscale order post hoc, or after the event, the attorney for Grayscale said in his letter.
"That is impermissible," the letter said.
Secondly, the VanEck order, which observes that bitcoin spot and futures prices may have a mixed or bi-directional relationship "in no way disproves the 99.9% correlation between spot and futures markets," Mr. Verrilli's letter said.
Thirdly, the SEC's letter failed to mention that the VanEck order was issued over two commissioners' dissent, the attorney for Grayscale said.
"The dissenters explained that the Commission uses 'a different set of goalposts' for proposed spot-bitcoin ETPs 'from those it used — and still uses — for other types of commodity-based ETPs,'" Mr. Verrilli's letter said.