KEY POINTS

  • Grayscale's Senior Legal Strategist Donald B. Verrilli Jr has filed a petition against the SEC
  • The agency rejected the requests of Bitwise and Grayscale for the approval of a BTC spot ETF
  • The financial authority has concerns related to market manipulation

Grayscale Investments' request for conversion of its Grayscale Bitcoin Trust (GBTC) to a BTC spot ETF has been declined by the Securities and Exchange Commission (SEC) and now the firm plans to initiate a lawsuit against the monetary authority.

Established in 2013, Grayscale Investments is a digital currency asset manager that filed for the conversion of its flagship product GBTC into a Bitcoin spot ETF last year. After multiple delays, the SEC has finally announced its decision on the same and it is not in favor of the firm.

Additionally, the SEC has also rejected the application for Bitwise spot ETF.

The reason for the rejection in both cases remains the same. The financial authority claims that the two firms failed to answer questions about preventing market manipulation and other concerns.

In the case of Grayscale, the SEC said that the applicant did not present "means to prevent fraudulent and manipulative acts and practices sufficient to justify dispensing with the detection and deterrence of fraud and manipulation that is provided by a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin."

A similar statement was released in the case of Bitwise as well. The SEC pointed out that the applicant fails to demonstrate the fact that "the bitcoin market as a whole or the relevant underlying bitcoin market is uniquely and inherently resistant to fraud and manipulation."

Following the letdown by the SEC, Grayscale announced that its Senior Legal Strategist, former U.S. Solicitor General, and partner at Munger, Tolles & Olson, Donald B. Verrilli Jr, has filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit on behalf of the digital asset manager.

“Grayscale supports and believes in the SEC’s 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,” said Grayscale CEO Michael Sonnenshein on Wednesday.

A small toy figure and representations of the virtual currency bitcoin stand on a motherboard in this picture illustration taken May 20, 2021.
A small toy figure and representations of the virtual currency bitcoin stand on a motherboard in this picture illustration taken May 20, 2021. Reuters / DADO RUVIC
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