Grayscale lawyers ask SEC to discuss greenlighting spot bitcoin ETF

Grayscale Investments wants to meet with the Securities and Exchange Commission, and it's urging the agency to approve the conversion of its Grayscale Bitcoin BTC -0.94% Trust into a spot bitcoin exchange-traded fund.

 "We hope you will agree that the best use of resources now is for the Commission to issue an order approving NYSE Arca’s Rule 19b-4 filing and authorize the staff to work with Grayscale and NYSE Arca to finalize the prompt listing of the Trust’s shares," lawyers for Grayscale said in a letter to the agency on Tuesday. "We believe the Trust’s nearly one million investors deserve this fair playing field as quickly as possible."

Three judges in the U.S. Court of Appeals for the D.C. Circuit ruled last week that the SEC has to re-review Grayscale's bid for a spot bitcoin ETF after the asset management firm sued the agency last year following its rejection of the plan for the conversion of its flagship GBTC fund. 

The court specifically addressed the SEC's differential treatment of spot bitcoin ETFs and similar funds based on futures contracts, which the regulator has approved. 

After reviewing the judges’ opinion, lawyers for Grayscale said the SEC should find that "there are no grounds" for treating its trust differently from bitcoin futures ETFs. 

"If any other reason could be offered in attempting to differentiate spot bitcoin ETPs from bitcoin futures ETPs—whether based on the Exchange Act’s requirement that rules be 'designed to prevent fraudulent and manipulative acts and practices' or otherwise—we are confident that it would have surfaced by now in one of the fifteen Commission orders that rejected spot bitcoin Rule 19b-4 filings even after bitcoin futures ETPs began trading," the lawyers said in the letter. 

A long road

The SEC has not yet greenlit a spot bitcoin ETF, though the judges’ opinion last week could be a positive for the slew of firms that have applied for spot bitcoin ETFs over the past few months including big names such as BlackRock and Fidelity. 

Experts have said the SEC could request an en banc hearing, meaning a rehearing in the next 45 days. After 45 days, the court will issue a final mandate that will have details on what happens next.

The agency could also seek review of the judges’ opinion in the Supreme Court, and it could pick a different reason to deny the ETF proposals.