Grayscale hits back against SEC’s rejection of VanEck’s spot Bitcoin ETF application

If SEC can approve Bitcoin futures ETFs, there should be no basis to reject spot Bitcoin ETFs, Grayscale presents  

Digital currency investing and cryptocurrency asset management company Grayscale Investment has issued a public letter to Vanessa Countryman, Secretary of the United States Security and Exchanges Commission (SEC). The company argued that the SEC’s rejection of the spot Bitcoin ETFs is inconsistent with the Commission’s earlier rulings.

The SEC has previously approved three Bitcoin futures ETFs, one each from VanEck, Valkyrie, and ProShares, Grayscale pointed out adding that there is thus no legal explanation for the recent rejection of VanEck’s spot Bitcoin ETF application.

The regulatory authority has “no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not,” Grayscale argued in the letter.

The investment company also accused the SEC of failing to uphold the provisions of the Administrative Protections Act (APA) as the SEC is treating two Bitcoin ETF products differently:

“We believe this rationale failed adequately to take account of significant regulatory and competitive developments since 2017 when the Commission first considered, and denied, a national securities exchange’s application to list and trade shares of a spot Bitcoin ETP.”

Grayscale recommended that SEC should exclude the requirements of Section 6(5)(b) under the Exchange Act for Bitcoin spot ETF applicants.

A spot Bitcoin ETF functions similar to holding the asset. Investors can trade on the current price of Bitcoin. However, a Bitcoin futures ETF allows traders to speculate on the future price of the asset through derivatives.

The SEC rejected VanEck’s application on November 12 citing that the application did not meet the requirements of the Securities Exchange Act of 1934 (Exchange Act).  Grayscale has submitted a similar application in October with a decision expected by the end of the year.

The prospects for Grayscale’s proposal to list GBTC as a Bitcoin spot ETF is not very positive in light of the SEC’s recent ruling on VanEck.