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  • Writer's pictureJamal Saafir

Grayscale Trumps SEC In Court

Updated: Sep 13, 2023

As reported by Cointelegraph, digital asset manager Grayscale Investments has achieved a monumental victory against the United States Securities and Exchange Commission in its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin exchange-traded fund (ETF). Recently, the SEC declined to approve its GBTC application on the grounds that the products were not “designed to prevent fraudulent and manipulative acts and practices.” Grayscale subsequently filed suit, and the decision was overturned.

U.S. Court of Appeals Circuit Judge Neomi Rao

According to August 29th court filings, U.S. Court of Appeals Circuit Judge Neomi Rao ordered Grayscale’s petition for review be granted and the SEC’s order to deny the GBTC listing application be vacated. Previously, Judge Rao stated that the SEC did not “offer any explanation” as to why Grayscale was in the wrong. Nevertheless, the order does not guarantee the eventual listing of

a Grayscale spot Bitcoin ETF.

Michael Sonnenshein, CEO of Grayscale, said on X (formerly Twitter) that its legal team is “actively reviewing” the court’s opinion.

On June 29th, 2022, the SEC rejected Grayscale’s application to transform GBTC into a spot ETF. The following day, Grayscale’s senior legal strategist, former U.S. Solicitor General Donald B. Verrilli Jr., submitted a petition for review with the United States Court of Appeals for the District of Columbia Circuit. At the time, Sonnenshein expressed in a statement that the firm was “deeply disappointed” and “vehemently disagreed” with the SEC’s decision to deny its application.

Grayscale Bitcoin Trust is the leading Bitcoin fund traded over-the-counter, with over $14 billion in assets under management. At an earlier point this year, shares of GBTC were trading at a discount of nearly 50% to the net asset value as a result of the firm’s then ongoing lawsuit with the United States Securities and Exchange Commission and credit worries regarding its parent, Digital Currency Group (DCG).

In October 2022, Grayscale terminated material agreements with its partner and digital currency broker Genesis Global. On November 16th, 2022, Genesis Global halted withdrawals, referencing extraordinary market disruption surrounding the fall of cryptocurrency exchange FTX. The firm was also affected by the fall of Singaporean crypto hedge fund Three Arrows Capital, with a $1.2 billion debt owed to Genesis still unresolved.

In January 2023, it was made known that DCG owes creditors over $3 billion and is contemplating a $500 million venture capital portfolio sale. Genesis Global holds a $900 million obligation to users of cryptocurrency exchange Gemini’s Earn program.

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