Court to rule on grayscale bitcoin ETF by Q3

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Grayscale CEO Michael Sonnenshein predicts the court could decide by the third quarter whether to overturn the SEC’s denial of his request to convert his Bitcoin trust into a cash exchange-traded fund.

While Sonnenshein did not say whether he anticipates a favorable ruling, he said Grayscale will seek to appeal the ruling to the Supreme Court if the case fails. And if that also fails, the company will discuss the possibility of obtaining relief from the tender offer rules with the SEC. On the other hand, Grayscale plans to work closely with the SEC to expedite the conversion process if the decision is in their favor, the CEO reiterated at the CoinDesks Consensus 2023 conference.

The crypto hedge fund told the court overseeing its lawsuit against the Securities and Exchange Commission that there is no justification for the agencies’ arbitrary disapproval of the spot-bitcoin ETP project.

In response to a brief filed by the SEC, Grayscale said it was illogical to decline a proposal for another spot bitcoin exchange-traded product.

The SEC sent a letter to the United States Court of Appeals for the District of Columbia Circuit advising of its recent order regarding the VanEck Bitcoin Trust. The letter says the order addresses relevant issues in the case, furthering the agencies’ basis for denying Grayscale’s request to establish a Bitcoin ETF.

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, to try to justify its denial. This is called post hoc reasoning, Verrilli said in a letter to the recent SEC order regarding the VanEck Bitcoin Trust.

He further argued that observing VanEck orders of a potential mixed or two-way relationship between bitcoin spot prices 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 Grayscales bitcoin products is unauthorized because it has not provided evidence that Grayscales claims are false.

Finally, the attorney pointed out that the SEC’s letter did not acknowledge that the VanEck order was issued despite the dissent of two of its commissioners.

In June 2022, the company that runs the world’s largest bitcoin fund sued the SEC after the agency rejected an offer to turn its investment vehicle into a fund that trades on major Wall Street exchanges.

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