Grayscale: SEC Broke the Law in Bitcoin ETF Denial

The brief maintains that the SEC’s decision was arbitrary, discriminatory and in excess of the commission’s statutory authority.

Just months before denying the Grayscale conversion, the filing says, “the Commission had approved two separate proposals for ETPs that hold as assets bitcoin futures (a derivative of bitcoin), after finding that those ETPs did not present an unacceptable risk of susceptibility to fraud or manipulation.”

But, the brief continues, “the price of bitcoin futures is subject to the identical risk of fraud and manipulation as is the spot price of bitcoin. That is because bitcoin futures represent the market’s prediction of future spot bitcoin prices, and prices in the bitcoin spot and futures markets align more than 99% of the time.”

The Grayscale brief goes on to explain that if, as the SEC has concluded, “bitcoin futures ETPs do not pose an unacceptably high risk of fraud and manipulation, then by definition neither do spot bitcoin ETPs.”

The brief also points that the Commission “has treated them as categorically different — a result that violates the bedrock requirements” of the APA as well as “the express statutory command that a national securities exchange’s rules not discriminate among securities issuers.”

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