Grayscale Investments’ CEO Michael Sonnenshein, has stated that the United States Securities and Exchange Commission (SEC) acted “arbitrarily” in denying approval for the Grayscale Bitcoin Trust (GBTC) to become a spot Bitcoin exchange-traded fund (ETF) in June 2022. Sonnenshein believes that if GBTC got the green light to “convert” to a spot Bitcoin ETF, there would be “no longer” a discount or a premium. He explains that there is a “couple billion dollars” of capital that would immediately go back into investors’ pockets if GBTC were approved as a spot Bitcoin ETF.
Grayscale is currently in the process of suing the SEC, with a decision challenging the SEC’s denial of its initial application potentially happening by as early as “fall 2023.” If the application to challenge the SEC gets denied, Grayscale might be able to appeal the case to the U.S. Supreme Court.
Read More: Grayscale CEO Says the SEC’s Approach Is Slowing Bitcoin’s Progress
The SEC’s Denial of Grayscale’s Proposal
The SEC filed a 73-page brief with the U.S. Court of Appeals for the District of Columbia in December 2022, outlining its reasons for denying Grayscale’s request to convert its $12 billion Bitcoin Trust into a spot-based Bitcoin ETF in June 2022. The SEC had made similar findings in several earlier applications to create spot-based Bitcoin ETFs. The agency based its decision on findings that Grayscale’s proposal did not sufficiently protect against fraud and manipulation.
Grayscale’s Response
Grayscale’s CEO Michael Sonnenshein believes that the SEC “violated the administrative procedures act” by approving Bitcoin Futures ETFs while rejecting “GBTC’s conversion.” He explained that this act ensures the regulator doesn’t show “favoritism” or act “arbitrarily.” Sonnenshein reiterated that Grayscale has over a “million investor accounts,” with investors worldwide counting on the firm to “do the right thing for them.”
Sonnenshein “can’t imagine” why the SEC wouldn’t want to “protect investors” and “return that value” to them. He added that Grayscale isn’t going “to shy” away from the fact that it has a “commercial interest” in this approval.
If GBTC was approved as a spot Bitcoin ETF, the fund would “bleed back” up to its net asset value (NAV). Currently, GBTC is trading at a discount to its NAV. However, if it were to convert to an ETF, there would be an “arbitraged mechanism” embedded, and there would be no longer a discount or a premium.
