Grayscale Appeals To SEC For Fair Play

Grayscale have asked the SEC to approve all Bitcoin spot ETFs at the same time, to avoid creating winners and losers.

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One of the most anticipated developments in the crypto space is the approval of one or more exchange-traded funds (ETFs) for Bitcoin.

Grayscale's Bitcoin Trust (GBTC) is a well-known investment vehicle that aims to track Bitcoin's price and has attracted nearly a million investors. Grayscale believes that converting GBTC to a spot Bitcoin ETF would result in significant value returns to its investors. However, the SEC denied Grayscale's application for such a conversion last June, leading Grayscale to take legal action against the regulator.

Now, Grayscale has publicly asked the SEC to approve all proposed spot Bitcoin ETFs at the same time, to avoid any unfair advantage arising from one being approved before the rest. In a recent post, Grayscale's Chief Legal Officer, Craig Salm, emphasized the importance of equitable decision-making and addressed concerns over potential market manipulation.

Fair And Orderly Decision-Making

On July 27, Grayscale's legal team submitted a letter to the SEC concerning eight spot Bitcoin ETF filings, including its own. The central argument concerned the hope of avoiding "winners and losers" in the approval process. Grayscale firmly believes that the SEC should treat all proposals equally, ensuring a level playing field for all participants.

To support its case, Grayscale suggested that the SEC could base its approval of spot ETFs on previous approvals for Bitcoin futures ETFs. According to the company, these two types of funds are "inextricably linked", with third-party research showing 99% price correlation between spot and futures markets, making a strong case for consistency in regulatory decisions. The move would not only encourage investment in Bitcoin but also promote a sense of stability and transparency within the crypto market.

Surveillance Sharing Agreements (SSAs) And Market Manipulation Concerns

Recent ETF filings from various companies, including Invesco, BlackRock, Valkyrie, VanEck, Wisdom, Fidelity, and ARK Invest, were updated to include surveillance sharing agreements (SSAs) with Coinbase. These agreements aim to provide the SEC with information on trading books and other relevant data to monitor potential market manipulation and irregular trading activities.

However, Grayscale argued that such agreements would not meet the SEC's standards. The company pointed out that Coinbase is not registered with the SEC as a securities exchange or broker-dealer, nor with the Commodity Futures Trading Commission as a futures exchange. Grayscale firmly believes that the approval of ETFs should not be contingent on SSAs, and that such agreements are unnecessary under the SEC's guidelines. Due to the high correlation between spot and futures pricing, "surveillance of the CME bitcoin futures market – a CFTC-regulated market of significant size and member of the Intermarket Surveillance Group, a global network of exchanges that share market surveillance – should sufficiently serve to protect against potential fraud or manipulation in the underlying spot bitcoin market."


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