In a letter dated 29 November, Grayscale Investments has questioned the Securities and Exchange Commission’s (SEC) decision to block Bitcoin Spot ETFs. The asset manager argued that the commission has “no basis” to allow investing in the derivatives market and not “in the asset itself.”
The SEC has made a series of rejections lately that includes an offering by VanEck. While Grayscale considers it “discriminately,” it is also awaiting approval on its filing to convert the Grayscale Bitcoin Fund (GBTC) into a spot offering.
Citing reasons such as strong demand for physically-backed products, Dave LaValle, Global Head of ETFs at Grayscale Investments, had previously argued,
“At Grayscale, we believe that if regulators are comfortable with ETFs that hold futures of a given asset, they should also be comfortable with ETFs that offer exposure to the spot price of that same asset.”
In the aforementioned letter, Grayscale also reiterated that because Bitcoin is not a “security,” there are no registration prerequisites under the Investment Company Act of 1940. Additionally, it questioned the regulator’s prior disapprovals premised on risks of fraud and market manipulation. According to the firm, the disapproval order “unfairly discriminates against BTC and its shareholders” and violates the Administrative Procedure Act (APA).
The crypto-industry has been long asking for a physically-backed spot ETF. Earlier last month, Bitwise also bet on a spot product with CIO Matt Hougan noting,
“Ultimately, what many investors want is a spot Bitcoin ETF. We think that’s possible. So Bitwise will continue to pursue that goal, and we will look for other ways to help investors get access to the incredible opportunities in crypto.”
Alas, SEC Chair Gary Gensler is more comfortable with crypto-Futures ETF over any spot offerings.
The letter also touched upon the fact that while the currently trading Bitcoin Futures products have been welcomed by the market, the “Commission has continued to apply its vague and discretionary Section” between the two products.
“Under the APA, the Commission must treat similarly situated products similarly unless it has a reasonable basis for disparate treatment.”
Grayscale claimed that the investor risks of Bitcoin-backed spot and Futures exchange products are “indistinguishable.” It went on to add that “unfair” treatment is more likely to “harm, rather than protect, U.S. investors.”