Grayscale Investments' aspirations were dashed when the Securities and Exchange Commission (SEC) denied its application to convert the Grayscale Bitcoin Trust product to a full-spot Exchange Traded Fund (ETF).
In response, the investment asset management has filed an appeal with the US Court of Appeals for the District of Columbia Circuit, claiming that the regulator breached the Administrative Procedure Act (APA) and the Securities Exchange Act of 1934.
The SEC's rejection is based on the fact that there is no trustworthy system in place to prevent fraud, which is the same argument it has used in previous rejection judgments. Grayscale filed an immediate appeal because it was prepared for this type of action, as Chief Executive Officer Michael Sonnenshein had promised a lawsuit months before the final verdict was expected.
“Grayscale supports and believes in the SECs mandate to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation -- and we are deeply disappointed by and vehemently disagree with the SEC's decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market,” Sonnenshein said.
In June, the corporation hired Donald Verrilli, a top Solicitor in the Obama Administration, to join its legal team. Verrilli will now lead the attack against the SEC, alleging that the existence of Bitcoin Futures ETFs on US exchanges invalidates the SEC's decision-making based on a lack of faith in the ecosystem's safety.
“This is a place where common sense has a really important role to play. You've got a situation now in which you have certain kinds of exchange traded funds, one that is focused on bitcoin futures, and the SEC has approved that, the SEC is given it the seal of approval,” he said to reporters back in June. “In order to do so it had to make a determination that that giving this approval was consistent with the securities laws, and in particular, that that there wasn't a sufficient underlying risk of fraud and manipulation.”
The appeal's timing has yet to be revealed, but this might be yet another drawn-out legal struggle between a crypto-native corporation and the US SEC following Ripple Labs Inc.
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