The SEC must submit its brief by Nov. 9. After that, Grayscale will then submit a reply brief on Nov. 30 before both parties submit a final brief on Dec. 21.
Digital asset manager Grayscale has filed its opening brief against the U.S. Securities Exchange Commission (SEC) to challenge its decision denying Grayscaleโs application to convert the Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF.
The worldโs largest digital asset management firm filed its opening legal brief on Oct. 11 in the U.S. Court of Appeals in the District of Columbia Circuit, in which it claimed the SECโs knockback to be โarbitrary, capricious and discriminatory.โ
Grayscale argued that the SEC treats spot Bitcoin Exchange-Traded Products (ETPs) with โspecial harshnessโ and is doing so โin excess of its statutory authority.โ
Attorneys for Grayscale argued that several Bitcoin Futures ETFs that have been previously approved by the SEC generate their prices based on the same indices as the spot Bitcoin ETF.
They stated that the SEC could not rationally conclude that Bitcoin Futures ETFs do not take on โthe very same risks in the very same marketโ as the spot Bitcoin ETF, adding:
โAlthough Bitcoin may be a relatively new asset, the legal issue here is straightforward. The Commission has violated the APAโs most basic requirements by failing to justify its vastly different treatment of Bitcoin Futures ETPs and spot Bitcoin ETPs.โ
Grayscale also argued that the SECโs โsignificant-market testโ โ one which assesses whether an exchangeโs proposal to list an ETP is โdesigned to prevent fraudulent and manipulative acts and practicesโ โ is โflawedโ and that the SEC โset the bar so highโ that it couldnโt possibly be satisfied.
Attorneys for Grayscale also noted that this significant-market test only applies to Bitcoin-related ETPs โ which led them to believe that they have been discriminated against.
Grayscale also argued the SECโs decision โharms the 850,000 investors who own shares in the Trustโ:
โGiven that the Commission did not approve the Trust to trade as an ETP on the Exchange, the value of its shares cannot closely track the value of the Trustโs underlying Bitcoin assetsโ depriving Trust shareholders of billions of dollars in value.โ
โThere is simply no justification for continuing to inflict such serious investor harm,โ the brief stated.
Related: Grayscale legal officer says Bitcoin ETF litigation could take two years
The filing in the U.S. Court of Appeals comes after the SEC officially denied Grayscaleโs application to convert GBTC to a spot Bitcoin ETF on Jun. 29.
On the same day, Grayscale initiated litigation by filing a โPetition For Review.โ
According to Grayscale, the SEC must submit its brief by Nov. 9. Grayscale will then submit a reply brief on Nov. 30 before both parties submit a final brief on Dec. 21.
Grayscale had $26.4 billion in assets under management (AUM) in Mar. 2022.
