Grayscale Investments has launched a legal challenge against the US Securities and Exchange Commission (SEC) after its application to convert the Grayscale Bitcoin Trust (GBTC) to a Bitcoin (BTC) exchange-traded fund (ETF) was denied.
On Wednesday, it announced that its chief legal strategist, former US Attorney Donald P. Ferrelli Jr., has petitioned for review with the US Court of Appeals for the District of Columbia Circuit.
Verrelli stated that the latest decision shows the SEC is acting “arbitrarily and volatile” by “failing to enforce consistent treatment of similar investment vehicles” and will pursue a legal challenge based on the SEC’s alleged violation of the Administrative Procedures Act (APA) and the Securities Act (SEA).
Grayscale Investments, which holds $12.92 billion in assets under management in GBTC, has been waiting for a decision from the SEC to convert its main Bitcoin fund into an existing ETF immediately since submitting its application to the regulator on October 19, 2021.
According to a filing from the securities regulator on Wednesday, the request was rejected “to protect investors and the public interest” because the proposal failed to show how it was “designed to prevent fraudulent and manipulative business and practices.”
The decision came a full week before the July 6 deadline, and came on the same day as a similar rejection of a Bitcoin exchange-traded Bitcoin (ETP) product.
Michael Sonnenchin, CEO of Grayscale, said in a statement on Wednesday that they are “deeply disappointed” and “strongly disagree” with the Securities and Exchange Commission’s decision to reject their application.
“We will continue to utilize the full resources of the company to defend our investors and the fair regulatory treatment of Bitcoin investment vehicles,” he said.
While the lawsuit has been filed, a court ruling on the matter is not expected until the third quarter of 2023 to the first quarter of 2024, James Seifart, ETF analyst at Bloomberg Intelligence, told his 19,400 followers on Twitter, which means we may We don’t see GBTC going. forward anytime soon.
Grayscale has been preparing its legal team for a potential dispute with the SEC. Earlier this month, the company appointed Donald P. Ferrelli Jr., a former US attorney general, to join its legal lineup.
Other attorneys in Grayscale’s legal lineup include attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm, who serves as chief legal officer.
Related: Grayscale Reports 99% of SEC Comment Letters Support Bitcoin Spot ETF
In March, Grayscale CEO Michael Sonnenchin told Bloomberg that his company would consider a lawsuit under the Administrative Procedures Act (APA) if the financial regulator rejected its Bitcoin Spot ETF application.