Grayscale scrutinizes SEC over denial of VanEck Bitcoin Trust
Crypto hedge fund Grayscale is telling the court overseeing its lawsuit against the Securities and Exchange Commission (SEC) that nothing justifies the agency’s arbitrary disapproval of the proposed spot-bitcoin ETP.
Replying to a brief filed by the SEC, Grayscale said that denying a proposal for a different spot bitcoin exchange-traded product is “illogical.”
The SEC has sent a letter to the U.S. Court of Appeals for the District of Columbia Circuit, dated Wednesday, notifying it of its recent order regarding the VanEck Bitcoin Trust. The letter states that the order addresses “relevant issues” related to the case, digging into the agency’s basis for denying Grayscale’s application to establish a Bitcoin ETF.
“The VanEck Order demonstrates that the Commission continues to arbitrarily treat proposed spot-bitcoin ETPs differently from bitcoin-futures ETPs. Nothing about that order justifies the agency’s arbitrary disapproval of the proposed spot-bitcoin ETP here,” said Donald B. Verrilli Jr., a partner with Munger, Tolles & Olson.
According to the attorney representing Grayscale, the SEC is using evidence and reasoning from the VanEck order, which is not part of the official record, in an attempt to justify its denial. This is known as “post hoc” reasoning, Verrilli said in a letter addressing the SEC’s recent order regarding the VanEck Bitcoin Trust.
He further argued that the VanEck order’s observation of a potential mixed or bi-directional relationship between bitcoin spot and futures prices does not disprove the 99.9% correlation that exists between these two markets. The letter stated that the SEC’s attempt to use the VanEck order to rationalize its decision regarding Grayscale’s bitcoin products is not permissible as it has not provided evidence that Grayscale’s claims are wrong.
Finally, the attorney pointed out that the SEC’s letter failed to acknowledge that the VanEck order was issued despite the dissent of two of its commissioners.
In June 2022, the company running the world’s biggest bitcoin fund sued the SEC after the agency rejected a bid to turn its investment vehicle into a fund that trades on major Wall Street exchanges.
This follows the company’s move to bolster its legal team to work on the ETF application. For this purpose, Grayscale hired former United States solicitor general Donald B. Verrilli Jr., who served between 2011-2016, and a team of attorneys at law firm Davis Polk & Wardwell.
The move aims to better make its case for converting the massive Grayscale Bitcoin Trust, which owns bitcoin rather than contracts tied to its future price, into an ETF.
