Grayscale says the US SEC has set the bar too high for Bitcoin funds

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Oct 11 (Reuters) – Grayscale Investments said in a court filing on Tuesday that the U.S. Securities and Exchange Commission had set the bar too high for bitcoin cash exchange-traded funds, which have so far only not been approved for listing on US stock exchanges.

Grayscale sued the regulator in June, after the SEC rejected its offer to convert its Grayscale Bitcoin Trust (GBTC.PK), the world’s largest bitcoin fund, into an ETF to list on Intercontinental’s NYSE Arca exchange. Exchange Inc (ICE.N).

The regulator had said the proposal failed to meet standards aimed at preventing fraudulent practices and protecting investors.

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The SEC has rejected more than a dozen bitcoin spot ETF applications and approved several ETFs based on bitcoin futures. The denials centered on the applicants’ lack of supervisory sharing agreements with regulated markets regarding the cash funds’ underlying assets. Such agreements involve the sharing of trading data and other information to enable the exchange to detect manipulation.

Grayscale argued in the court filing that the SEC did not apply its standards consistently to spot bitcoin ETFs and ETFs based on bitcoin futures, even though the two types of funds are both fundamentally related. at bitcoin price.

“There is only one reasonable conclusion to draw: the Commission treats bitcoin spot ETPs with particular severity based on its view of the merits of bitcoin over other types of investments,” the company said in the filing.

There is no bitcoin cash market that the SEC considers regulated, Grayscale said. But the NYSE Arca had a supervisory sharing agreement with the Chicago Mercantile Exchange, where bitcoin futures trade, he said.

Since the SEC has deemed other agreements with CME sufficient to prevent fraud in bitcoin futures-based ETFs, the same should apply to bitcoin spot ETFs since both types of funds depend on the price of bitcoin, Grayscale said.

Grayscale also argued that the SEC acted outside of its authority by not agreeing to other means of mitigating the risk of fraud.

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Reporting by Jody Godoy in New York; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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