Grayscale, a crypto fund manager, previously faced rejection from the Securities and Exchange Commission (SEC) for its ETF proposal, along with several other spot Bitcoin ETF applications. Now, Grayscale is urging the SEC to approve all the proposed spot Bitcoin ETFs simultaneously to ensure that no single ETF gains an advantage over the others.
In a post on July 27, Grayscale’s Chief Legal Officer, Craig Salm, stated that their legal team submitted a letter discussing eight spot Bitcoin ETF filings, including Grayscale’s own application. The letter argued against the SEC favoring certain ETFs over others, emphasizing the need for a fair and well-organized decision-making process.
According to the letter, they suggested that the SEC could use its previous approvals of Bitcoin futures ETFs as a basis for approving spot ETFs, as these two types of funds are closely related.
Additionally, this assset manager raised concerns about the recent surveillance sharing agreements (SSAs) between Coinbase and the spot ETF providers. They claimed that these agreements, which involve sharing trading data for regulatory purposes, are not a novel concept and may not meet the SEC’s standards.
Grayscale Appeals SEC’s Decision on Bitcoin ETFs
Recently, several major players in the financial industry, including Invesco, BlackRock, Valkyrie, VanEck, Wisdom, Fidelity, and ARK Invest, updated their ETF filings to include Surveillance Sharing Agreements (SSAs) with Coinbase. These agreements would involve Coinbase sharing information about its trading activities and other relevant data with the Securities and Exchange Commission (SEC). The purpose behind these SSAs is to enable the SEC to monitor the crypto markets closely for any signs of potential market manipulation or irregular trading behavior.
The SEC had raised concerns about the lack of SSAs in the ETF filings, expressing the belief that such agreements were necessary due to the perceived possibility of market manipulation in the cryptocurrency markets. As a result, in late June, the SEC postponed its decision on these ETFs.
However, Grayscale, a prominent crypto fund manager, contested the necessity of the SSAs under the SEC’s standards. They argued that these agreements would not meet the SEC’s requirements because Coinbase is not registered with the SEC as a securities exchange or broker-dealer, nor with the Commodity Futures Trading Commission as a futures exchange. Grayscale implied that the inclusion of SSAs may not be essential or sufficient to address the SEC’s concerns about market manipulation.
Grayscale contended that approving the ETFs would represent a positive change in the SEC’s standard application. However, they emphasized that it would also lead to a sudden and significant shift, granting an unfair and discriminatory advantage to these particular proposals over others.
According to Grayscale’s Chief Legal Officer, Craig Salm, the Grayscale Bitcoin Trust (GBTC), which is designed to track Bitcoin’s price, has attracted nearly 1 million investors. He asserted that converting GBTC into an ETF would generate substantial value for these investors. Consequently, he argued that there is no valid reason for the SEC to prevent GBTC investors from accessing a spot Bitcoin ETF.
The SEC had previously denied Grayscale’s application to convert GBTC into a spot Bitcoin ETF in June of the previous year.
In response to the SEC’s decision, Grayscale took legal action against the regulator, alleging that the SEC’s actions were arbitrary and lacked consistent treatment of similar investment vehicles.