A lawsuit was recently filed against the US SEC (Securities and Exchange Commission) by Grayscale Investments. The lawsuit was filed after the securities regulator opted to nix the proposal of the digital asset manager to form a spot bitcoin ETF. The CEO of Grayscale Investments said on Thursday that they expected the decision in the case to be made within a year’s time.
SEC turns down the proposal
Late on Wednesday, the SEC ruled that the proposal put forth by Grayscale Investments did not comply with the standards that were designed to protect investors from fraudulent practices. Grayscale has the largest bitcoin fund in the world. The digital asset manager wants to convert it into an ETF and then list it on the NYSE Arca exchange of Intercontinental Exchange Inc.
In the last year, the Securities and Exchange Commission had received over a dozen proposals related to spot bitcoin ETFs. The regulatory authority had given its approval for a number of futures-based bitcoin ETFs. As far as the rejections are concerned, they are about the absence of surveillance sharing agreements of the applicants. This surveillance is applicable to regulated markets that are related to the underlying assets of the spot fund.
Grayscale CEO speaks out
Michael Sonnenshein, the chief executive of Grayscale, stated that the SEC was acting in a capricious and arbitrary manner by not giving its approval for spot bitcoin ETFs. Almost immediately after news of the rejection was announced, the digital assets manager decided to sue the regulatory agency.
Since the defendant in the said lawsuit is a regulatory authority, this means that the case will directly go to an appellate court. Therefore, Grayscale’s CEO implied that a decision could be announced as early as 12 months. The SEC did not comment on the lawsuit, but on Wednesday, it also turned down another proposal for a spot Bitcoin ETF that it had received from Bitwise.
There have been other companies that have seen their applications for a spot bitcoin ETF declined by the securities regulator. These include some prominent names, such as SkyBridge, Fidelity, and Valkyrie. The Securities and Exchange Commission does not believe that these ETFs can protect investors from the volatility and risks associated with the cryptocurrency market.
On Thursday, the price of the world’s largest cryptocurrency i.e. Bitcoin fell below the threshold of $20,000. It had hit the $18,736 mark, which was just a bit higher than the 18-month low value of the volatile crypto of $17,592 that it had reached on June 18th. Last year in November, the cryptocurrency reached an all-time high value of $69,000.
In its rejection of the application put forth by Grayscale Investments, the regulatory authority clarified that this decision was not based on an evaluation of whether blockchain technology or crypto can offer value or utility as an investment or innovation. Chairman Gary Gensler of the SEC recently admitted that Bitcoin was a commodity.