Key Points:
Grayscale’s lawyers blasted regulators for approving a leveraged Bitcoin-based exchange-traded fund (ETF) in the midst of the company’s litigation against the SEC for rejecting its own spot Bitcoin ETF application, according to a letter the company tweeted.
According to the letter, which was sent to the United States Court of Appeals for the District of Columbia Circuit, the SEC authorized a leveraged ETF in late June that is even riskier than its traditional Bitcoin-based futures exchange-traded products.
“The fact that the Commission has allowed a leveraged Bitcoin futures (exchange-traded product) to begin trading demonstrates that the Commission continues to arbitrarily treat spot Bitcoin ETPs differently than Bitcoin futures ETPs,” Grayscale Senior Legal Strategist Donald B. Verrilli Jr., a partner at Munger, Tolles & Olson, wrote in the letter.
Such claimed arbitrary treatment is at the heart of Grayscale‘s action against the SEC, which was brought after the agency declined an application to convert the Grayscale Bitcoin Trust, symbol GBTC, to a spot Bitcoin ETP on June 29, 2022.
Grayscale argued in its October 2022 opening brief that the SEC arbitrarily determined that a proposed rule change sought by NYSE Arca to list and trade shares of the trust wasn’t designed to prevent fraud and manipulation, despite the fact that Bitcoin futures ETPs approved by the SEC face the same fraud and manipulation risks. In March, the DC Circuit Court heard arguments from both sides and a decision is expected before the end of the year.
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