Grayscale claims that the SEC is risking violating the Administrative Procedure Act by rejecting spot Bitcoin ETFs

SEC Approving Spot Bitcoin ETF Is ‘a Matter of When and Not If’

The Securities and Exchange Commission (SEC) of the United States has officially approved two separate bitcoin futures exchange-traded funds (ETFs). This has fueled speculation in the crypto community that the Securities and Exchange Commission is on the verge of authorizing a spot bitcoin ETF.

The Investment Company Act of 1940 is used in the first structure (40 Act). This Act has been used to file the majority of proposed bitcoin futures ETFs so far. The Securities Act of 1933 is used in the second (33 Act). The Teucrium Bitcoin Futures ETF, which uses the latter format, was approved earlier this month.

"From the SEC standpoint, there were several protections that 40 Act products have that 33 [Securities Act of 1933] products don't have," Grayscale Investments CEO Michael Sonnenshein told CNBC last week. "But those protections never ever addressed the SEC's concern over the underlying bitcoin market and the potential for fraud or manipulation."

"So the fact that they've now altered their thinking and approved a 33 Act product with Teucrium really invalidates that argument and speaks to the connectivity between bitcoin futures and the underlying bitcoin spot markets that provide futures contracts their value," he concluded. Sonnenshein expressed his opinion as follows:

If the SEC can’t look at two like issues, the futures ETF and the spot ETF, through the same lens, then it is, in fact, potentially grounds for an Administrative Procedure Act violation.

The Administrative Procedure Act (APA) oversees the development and issuance of regulations by federal agencies.

Grayscale filed a request with the Securities and Exchange Commission (SEC) on Oct. 19 of last year to convert its flagship bitcoin trust (GBTC) into a bitcoin ETF. Grayscale's main product, GBTC, manages about $26 billion in assets as of April 15. GBTC will be listed on the New York Stock Exchange rather than the OTCQX if the SEC approves it.

The company is awaiting word from the Securities and Exchange Commission (SEC) in early July on whether the filing will be authorized. If the SEC does not accept the GBTC conversion, the CEO has intimated that the company may file a lawsuit against the agency.

Sonnenshein emphasized when asked if the SEC would allow a spot bitcoin ETF: