On Tuesday, a letter was sent to the US Securities and Exchange Commission (SEC) by attorneys representing Grayscale Investments.
The lawyers of the crypto asset manager urged the agency to approve a spot Bitcoin ETF ‘expeditiously’, after Grayscale had been granted a victory against it recently in court.
The letter
Law firms Munger Tolles & Olson and Davis Polk sent the letter after a panel of the US District Court of Appeals for the D.C. Circuit, comprised of three judges, issued a ruling in the previous week.
According to the ruling, the SEC had rejected the spot Bitcoin ETF application from Grayscale without any solid reason, which put them in the wrong.
The ruling dictates that the SEC reconsider the application once more, even though there is still time for the agency to file an appeal.
The lawyers for Grayscale said that the commission should not use different treatment for the GBTC as compared to exchange-traded products (ETPs) investing in Bitcoin futures contracts.
They were referring to the Bitcoin futures ETFs that have been approved by the SEC.
The reasoning
According to Grayscale, the SEC should grant approval for their spot Bitcoin ETF because the same market surveillance arrangement that has been deemed suitable for Bitcoin Futures ETF will be used.
This agreement has been made with the Chicago Mercantile Exchange (CME). The appeals court was also in agreement with this fact, as it said that the SEC had been unable to explain the material difference between the two arrangements.
The lawyers for Grayscale said that if there had been any other reason given for the different treatment of Bitcoin Futures ETPs and spot Bitcoin ETPs, then it would have been mentioned by now.
The introduction of a spot Bitcoin exchange-traded fund (ETF) would provide investors with mainstream exposure to Bitcoin without needing to directly own the cryptocurrency.
All spot Bitcoin ETF applications have been denied by the SEC over market manipulation concerns associated with the investment product.
More arguments
The largest Bitcoin fund in the market is the Grayscale Bitcoin Trust (GBTC) and the total value of assets under management stands at $16 billion.
However, in order to fund the Bitcoin holdings, the shares of the GBTC trade at a discount, which the attorneys claim is harming investors ‘unjustifiably’.
As per the lawyers, this harm can be avoided if the SEC grants approval to convert the trust into an ETF. There had been a tightening in the discount on the day of the court ruling.
In the letter, the attorneys representing Grayscale also highlighted that the absence of a spot Bitcoin ETF was driving US investors into more complicated and less efficient structures.
This was referring to the recent inflows that Bitcoin ETFs have recorded after the court’s ruling. Furthermore, it also said that there is new competition for Grayscale.
This is because a number of other companies have submitted spot Bitcoin ETF applications in recent weeks.
In its comment letters, Grayscale has maintained that additional requirements cannot be introduced for spot Bitcoin ETFs than the ones that already exist for Bitcoin futures ETFs.