SEC enters fight with Grayscale

Last Updated: 13 December 2022

The US Securities and Exchange Commission (SEC) last week issued a response in the case with Grayscale. They are defending themselves against claims regarding Grayscale Investment’s lawsuit.

Lawsuit over bitcoin ETF

At issue is a lawsuit over its application to turn the Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF). This request was rejected earlier this year. However, according to Grayscale, it is “arbitrary, capricious and discriminatory”.

Grayscale therefore filed a lawsuit against the SEC on 29 June. She asked the US Central Board of Appeals for the District of Columbia Circuit to review the SEC’s order.

However, the SEC stands firm. Now they are commenting on the case for the first time in six months.


The regulator reiterates that the reasons for refusing Grayscale’s applications were in line with its previous decisions regarding other spot bitcoin ETF applications. Thus, Grayscale is not being treated differently from other asset managers.

According to the exchange watchdog, futures ETFs and spot markets ETFs are not the same and “have fundamental differences in terms of their ability to detect and deter fraud and manipulation”. They therefore consider it “reasonable to treat the two products differently”.

Futures ETFs, unlike spot ETFs, can only be traded on the Chicago Mercantile Exchange (CME). The ETFs based here are approved. Spot market bitcoin ETFs get zero approval every time so far.

Without proper oversight, spot ETFs may be vulnerable to “fraudulent and manipulative behaviour, including wash trading, price manipulation by whales, malicious control of the bitcoin network, hacking, insider trading, manipulative activities with ‘stablecoins’ and crypto exchange fraud”.

The SEC also highlights a statement from the New York Stock Exchange stating that “fraud and manipulation may exist and bitcoin trading on any given exchange may not be more resistant to fraud and manipulation than other commodity markets.”

The initial lawsuit received much acclaim from the crypto industry and beyond, with five amicus curiae filed for the case. Coinbase, among others, voiced support for Grayscale.

Grayscale’s response to the SEC is scheduled for 13 January. The SEC’s response to Grayscale is scheduled for 3 February.


  • Ivan came across the topic of cryptocurrencies in early 2016 and, as an author and enthusiast, has been intensively involved with the topics of cryptocurrencies, blockchain and STOs ever since.

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