SEC Finds 'No Grounds' to Deny Conversion of Bitcoin ETF, Grayscale Says

Grayscale Investments has informed the U.S. Securities and Exchange Commission that there are "no grounds" to oppose the transformation of its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).

Last week, the SEC received a court order to revisit its previous denial of the conversion in the D.C. Circuit Court of Appeals. Circuit Judge Neomi Rao concurred with Grayscale's argument that their proposed product bears no significant distinctions from the bitcoin futures exchange-traded products (ETPs) already in existence and traded within the U.S.

"After the Commission has had the opportunity to fully analyze the court’s opinion in light of the record, including the reasons for rejection set forth ... we believe the Commission should conclude that there are no grounds for treating the Trust differently from ETPs that invest in bitcoin futures contracts," Grayscale's legal team wrote in a letter to the regulator on Tuesday.

Grayscale added a swipe at the SEC's track record for rejecting spot bitcoin ETF applications, saying that if there was any difference between these and futures-based product, "it would have surfaced by now in one of the 15 Commission orders that rejected spot bitcoin Rule 19b-4 filings even after bitcoin futures ETPs began trading."

The court decision from last week mandated that the SEC reevaluate its prior denial of Grayscale's application, rather than automatically granting approval, despite the tone conveyed in Grayscale's letter, which seemed to anticipate an imminent approval.