The SEC categorized Bitcoin Futures ETF and spot Bitcoin ETF as separate products.
Grayscale Investments, one of the crypto industry’s largest digital asset managers has shed useful insight into its ongoing lawsuit with the United States Securities and Exchange Commission (SEC). In a Question and Answer (Q&A) session, Craig Salm, Grayscale’s Chief Legal Officer reiterated the fact that the company’s argument is solid, and irrespective of the length of years it will take, it is hopeful the Appellate Court will rule in its favor.
The company received the decision on its application to convert its flagship Grayscale Bitcoin Trust to a full-fledged spot Bitcoin Exchange Traded Fund (ETF) on June 29 and filed a Petition for Review the same day. Craig explained that the Petition for Review “asks the court to review the SEC’s decision to deny our application to convert GBTC to a spot Bitcoin ETF, and is the first step in initiating a lawsuit.”
The astute lawyer noted that the lawsuit was necessary as the SEC’s decision got a unanimous vote from both the SEC executives and commissioners.
After the Petition for Review, Craig outlined that the lawsuit procedure will entail a four-stage event including Briefings, Selection of Judges, Oral Arguments, and then the Final Decision. When asked why the company chose the Court of Appeals for the lawsuit, Craig noted that the fact that the company was suing a Federal Agency made the Appellate Court the right call.
“..because Grayscale is suing a federal agency – the SEC – we bypass the district court level, and our case moves immediately to the appellate court level. This is important because it shortens the timeframe to get a final decision,” he said.
Craig allayed the concerns many may have with respect to the relationship between the company and the SEC following this initiated lawsuit. He noted that private companies sue Federal Agencies all the time, a trend that highlights how advanced the country’s democratic process is.
Grayscale and SEC Lawsuit: Probable Backup Plans
In his explanations of the chances of Grayscale in the filed lawsuit, Craig noted that the SEC categorized Bitcoin Futures ETF and spot Bitcoin ETF as separate products. However, he noted that irrespective of the commission’s stance, the underlying price markers for a futures ETF is derived from the spot price of Bitcoin, making the differences insignificant.
Drawing on the disparity, Craig said they “…believe that approval of Bitcoin futures ETFs, but not Bitcoin spot ETFs, is “arbitrary and capricious” and “unfair discrimination,” in violation of the Administrative Procedure Act (APA) and Securities Exchange Act of 1934 (“Exchange Act” or “‘34 Act”)”
While newly hired Grayscale’s top legal strategist, Donald B Verrilli will be representing the firm drawing on his deep experience and success as a top Strategist during the Obama Administration, the company says it is confident of victory.
However, should the Appellate Court rule against its petition, Craig said the two options left for the firm will be an ‘en banc’ hearing and an appeal to the US Supreme Court. All of these other options are bound to take more time with their own unique complexities, however, at the Appellate level, Craig is projecting 12 months to 2 years period to resolve the case.