Grayscale law firm Davis Polk urges SEC to approve Bitcoin spot ETF, citing best use of resources

Grayscale Investment, one of the companies in the Bitcoin Spot Exchange-Traded Fund (ETF) race, has urged the US Securities and Exchange Commission (SEC) to approve its Bitcoin Trust (GBTC) conversion to an ETP, citing recent court victory. Grayscale CEO Michael Sonnenshein shared the development on social media platform X. 

Also Read: Grayscale wins lawsuit against US SEC, Bitcoin price nears $28,000

Grayscale follows up the recent win with another letter to SEC

Grayscale Investment, through its legal representatives at Davis Polk, has asked the US SEC to approve its Bitcoin Trust conversion to an ETP. Noteworthy, an ETP is basically an ETF on Grayscale’s terms.

We would appreciate the opportunity to meet with the staff of the Securities and Exchange Commission as soon as practical to discuss the way forward in view of recent developments in the Trust’s ongoing effort to convert to an exchange-traded product (“ETP”).

After the SEC rejected Grayscale’s proposal to have the GBTC converted, the investment firm appealed in court and secured a victory on August 29, though the commission still has room to appeal. As the SEC continues modeling its entreaty, Grayscale’s lawyers have followed up with a letter in an attempt to expedite the process.

…we believe the Commission should conclude that there are no grounds for treating the Trust differently from ETPs that invest in bitcoin futures contracts traded on the Chicago Mercantile Exchange (“CME”).

Notably, the SEC has filed fifteen orders rejecting spot BTC filings even after Bitcoin futures ETPs began trading on the CME. This is one of Grayscale’s bones of contention on the matter, with others being that Bitcoin and Bitcoin futures are closely correlated, and that the surveillance sharing agreements (SSA) with the CME are similar therefore share the same potential to detect malicious activities in the market.

Excerpt from Davis Polk letter to the SEC

With this, Grayscale calls out the commission for dragging the matter too long, and in so doing, harming the Trust’s existing investors as their shares now trade at a discount to net asset value.

Grayscale’s lawyers articulate, “the Trust is ready to operate as an ETP upon Commission approval,” urging the SEC to agree that the best use of resources now is for the Commission to issue an approval order.

While the SEC’s stance is that, applicants are yet to prove beyond reasonable doubt that they can protect investors from market manipulation, the euphoria around BTC spot ETFs is that investors would be exposed to the flagship crypto even without being actual owners. 

Also Read: Grayscale Bitcoin Trust to readjust fees if SEC approves its spot BTC ETF applications