SEC rejects Grayscale's bid to convert GBTC to a Bitcoin ETF

Quick Take

  • The SEC has denied Grayscale’s bid to convert its flagship product to a spot-based bitcoin ETF.
  • In the lead-up, Grayscale pushed back on previous arguments made by the SEC and built up its legal resources.

The Securities and Exchange Commission (SEC) has denied Grayscale's proposal to convert its flagship product into a spot-bitcoin exchange-traded fund (ETF).

The securities regulator issued a rejection order for the conversion of Grayscale's Bitcoin Trust (GBTC) today after repeated extensions on the application. The SEC has yet to allow a spot-bitcoin ETF to list, though it's green-lit multiple futures-based products.

In its rejection order, the agency said:

"This order disapproves the proposed rule change, as modified by Amendment No. 1. The Commission concludes that NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), which requires, in relevant part, that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”

For its part, issuer Grayscale has already attempted to push back on this argument.


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In the wake of other spot ETF rejections, it sent a letter to the regulator arguing that its willingness to allow a futures product but deny spot offerings could constitute a violation of the Administrative Procedures Act. Because a futures product is priced based on the underlying market, Grayscale and other advocates argue it's inconsistent to deny a spot product on the grounds of insufficient protections against market manipulation when the approved products are priced based on that underlying market. 

In the lead-up to the decision, Grayscale prepared for approval through a deal with Jane Street and Virtu to close the discount of GBTC upon conversion. That deal cannot move forward without approval.

Still, at the time, Grayscale said it was preparing for all possible outcomes and had beefed up its legal resources in the lead-up to the decision. In the lead-up to the decision, Grayscale said it was committed to converting the product.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Aislinn Keely is a reporter on The Block's policy team holding down the legal beat. She covers court decisions, bankruptcies, regulatory actions and other key moments in the legal sphere, putting them in context for the wider crypto industry. Before The Block, she lent her voice to the NPR affiliate WFUV and helmed Fordham University's student newspaper. Send tips or thoughts on all things policy and legal to or follow her on Twitter for updates @AislinnKeely.