Grayscale CLO says firm is 'laser focused' on preparing arguments against SEC ETF rejection

Quick Take

  • Grayscale lodged a legal challenge to the SEC’s rejection of its attempt to convert GBTC to a bitcoin ETF.
  • In a new interview, CLO Craig Salm said the firm is preparing its brief for the appellate court. 

Grayscale Chief Legal Officer Craig Salm says the firm and its counsel are "laser-focused" in writing their brief to present to the appellate court in their case against the US Securities and Exchange Commission (SEC).

The firm brought a case against the SEC last month after the securities regulator denied its most recent attempt to convert its Grayscale Bitcoin Trust (GBTC) to a spot bitcoin exchange-traded fund (ETF) to market. The SEC has yet to allow a spot bitcoin product to reach the market, with repeated denials citing a lack of sufficient protection against market manipulation.

In the lead up to its denials, during which time the SEC rejected multiple similar products, Grayscale pushed back on the regulator's arguments. It sent a letter to the agency arguing that the repeated rejections could violate the Administrative Procedure Act (APA), since the SEC has approved multiple bitcoin futures ETFs. According to spot bitcoin ETF supporters, any manipulation found in the spot market would affect the futures market, making the SEC's willingness to approve a futures product but not a spot offering inconsistent.

Now Grayscale is locked in a legal battle with the SEC to hammer out that argument. In an interview at Bloomberg's crypto event eon July 19, Salm said that because the issuer is challenging a decision from a federal agency, its complaint bypasses district courts and goes straight to the appellate level, which will save time in a possibly lengthy legal battle. 


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"Based on discussions with our counsel, we're hearing at the appellate level anywhere from 9 to 12 months — could be shorter, could be longer," Salm said. "Litigation is inherently uncertain in terms of timing."

The case is at the start of the process, and Grayscale is primarily focused on putting together its legal arguments to present before the court. Salm said the argument is "straightforward and simple."

"You have futures ETFs. You have spot ETFs. They both draw their pricing based on the underlying markets, so if you're okay with one, you should also be okay with the other."

© 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.