Grayscale Investments filed a lawsuit against the Securities and Exchange Commission, challenging the SEC's decision to deny the conversion of the Grayscale Bitcoin Trust to a spot bitcoin exchange-traded fund, a court filing shows.
The court filing came after the SEC in separate orders issued Wednesday disapproved proposed rule changes to list and trade shares of the Grayscale Bitcoin Trust as well as another spot bitcoin exchange-traded product, the Bitwise Bitcoin ETP Trust.
Donald B. Verrilli, Jr., Grayscale's senior legal strategist and former U.S. solicitor general, filed the petition for review with the U.S. Court of Appeals for the District of Columbia Circuit.
The legal team at Grayscale, one of the largest digital currency asset managers, also includes attorneys at Davis Polk & Wardwell, according to a Grayscale spokeswoman, who on Thursday added that Grayscale uses the generic term ETF even though the offering would strictly speaking be an exchange-traded product as it would not be registered under the Investment Company Act of 1940.
"As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934," Mr. Verrilli said in a Grayscale news release Wednesday, adding that there exists "a compelling, common-sense argument here, and we look forward to resolving this matter productively and expeditiously."
On Oct. 19, 2021, NYSE Arca filed with the SEC for the proposed rule change to list and trade shares of the Grayscale Bitcoin Trust, according to the SEC's order.
"The commission concludes that NYSE Arca has not met its burden under the Exchange Act and the commission's Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), which requires, in relevant part, that the rules of a national securities exchange be 'designed to prevent fraudulent and manipulative acts and practices' and 'to protect investors and the public interest,'" the SEC said in its separate orders disapproving the rule changes relating to both the Grayscale Bitcoin Trust and the Bitwise Bitcoin ETP Trust.
In a statement Thursday, Bitwise Asset Management said it was disappointed with the SEC's decision to disapprove the Bitwise Bitcoin ETP Trust application, adding that the firm had submitted more than 130 pages of "original, data-driven research" in an effort to answer questions raised by the SEC in previous spot bitcoin disapproval orders.
"We believe the bitcoin market has matured enough to warrant approval, that the data in the record supports that approval, and that a spot bitcoin ETF would ultimately benefit investors," the statement said.
Bitwise remains "committed to bringing a spot bitcoin ETF and other high-quality crypto products to investors," the statement said.
A spokeswoman for the SEC declined to comment beyond the agency's order.
