A firm billing itself as the world’s largest cryptocurrency asset manager has filed a legal challenge against US securities regulators after they denied an application to list a Bitcoin-focused fund on the stock exchange.
Grayscale filed a petition with a federal appeals court on Wednesday, after the Securities and Exchange Commission said the proposed fund did not meet the requirements for investor protection and lacked sufficient safeguards against fraud and manipulation.
The company wanted to list its Grayscale Bitcoin Trust (GBTC) fund on the New York Stock Exchange’s Arca trading platform as an exchange-traded fund, an investment fund that tracks the moves of specific assets, often focused on a particular sector.
The company said the legal move was called for due to the SEC’s “arbitrary and capricious actions and discriminatory treatment of issuers.”
“We are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the US market,” Grayscale CEO Michael Sonnenshein said in a statement.
GBTC’s ETF “would unlock billions of dollars of investor capital while bringing the world’s largest Bitcoin fund further into the US regulatory perimeter,” Sonnenshein added.
The SEC has rejected several requests similar to Grayscale’s in recent months, including from Fidelity, First Trust and SkyBridge Capital.
The price of bitcoin has collapsed since the beginning of the year, recently falling below the $20,000 mark, the lowest in a year and a half, from a peak of nearly $69,000 in November 2021.
The leading cryptocurrency, renowned for its volatility, has been weighed down by investors’ lack of appetite for risk in a market worried about inflation and rising interest rates in Europe and the United States.
Grayscale argues that the SEC decision is inconsistent with prior decisions allowing listing of several ETFs linked to Bitcoin futures contracts.
“If regulators are comfortable with ETFs that hold derivatives of a given asset, they should logically be comfortable with ETFs that hold that same asset,” the company said.