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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