Grayscale has submitted a response brief in its appeal against the US Securities and Exchange Commission’s (SEC) rejection of its proposal to transform its $12 billion Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF that is based on spot prices.
The brief, which was filed in the District of Columbia Circuit Court, refutes the points made in the SEC’s December response brief and reiterates Grayscale’s original arguments.
GBTC Conversion To A Spot Bitcoin ETF
Grayscale’s Chief Legal Officer, Craig Salm, announced via a Twitter thread that they had filed a reply brief in their appeal against the US SEC. Salm stated that this is a significant milestone as Grayscale filed the Petition for Review in June, their Opening Brief in October, and the SEC’s Reply Brief in December.
The recent brief is shorter than the previous one and “addresses counterpoints made by the SEC in their brief while also re-emphasizing key substantive arguments from” the Opening Brief.
Salm accused the SEC of treating spot bitcoin ETFs differently from bitcoin futures ETFs, despite both deriving their pricing from the same underlying spot bitcoin markets.
Salm further stated that the “significant market test” used by the SEC to evaluate the proposal is deeply flawed, exceeds their statutory authority, and is arbitrary and unreasoned.
Salm also stated that Grayscale believes:
Our proposal to convert GBTC to a spot bitcoin ETF satisfies the requirements of the Exchange Act because it is designed to prevent fraud and manipulation while protecting investors and the public interest.
He also announced that they would continue to keep their community apprised of developments in the litigation. The next milestone will be their final briefs, due February 2nd. He also noted that the timing for oral arguments is uncertain, but it may be as soon as Q2, the final decision in DC Cir. App. Court could come by Fall.
Salm Call Support For Grayscale Bitcoin Trust’s Case
Grayscale’s Chief Legal Officer Craig Salm, in a tweet on January 11th, called on the public to support their case. He emphasized that this case is of paramount importance for the 850k+ shareholders who hold GBTC, as the conversion is expected to close the current discount to NAV and unlock over $4 billion of value.
Salm also stated that Grayscale has some of the best legal minds representing GBTC shareholders in the District of Columbia Circuit Court of Appeals, including Don Verrilli, a former Solicitor General under the Obama administration, and his team at MTO and Davis Polk.
While expressing confidence that the Court will rule in their favor, Salm also acknowledged that they have committed to exploring alternative paths to returning capital to GBTC shareholders if their legal challenge is unsuccessful.
These options could include a tender offer for a portion of GBTC shares, subject to relief and approvals from the SEC, as outlined by Sonnen shein.
However, Salm emphasized that pursuing an alternative path would deviate from GBTC’s long-held ETF aspirations and would not be an ideal outcome. It would also effectively mean that regulators have shut the door on efficient access to Bitcoin through US-regulated investment vehicles.
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