In its legal battle against the SEC’s denial of a bitcoin ETF, Grayscale has begun with a bang and has presented a strong case.
A strong legal team
Grayscale has gone into the fight with a powerhouse legal team. Craig Salm, Chief Legal Officer, heads up the team, with Don Verrilli, former Solicitor General of the U.S. during the Obama administration, together with counsel from the law attorneys of Davis Polk.
According to Michael Sonnenshein, CEO of Grayscale, his company left the courtroom after the first week feeling extremely encouraged. He said that the arguments that were presented in court were the same consistent arguments that Grayscale had used in its initial application for an ETF.
Futures vs spot debate
In a podcast interview with The Block, Sonnenshein explained how Verrilli had highlighted in court how the SEC had approved a bitcoin futures product under the 33 act, but had denied a bitcoin spot ETF under the same circumstances.
It is being argued by grayscale that the bitcoin futures ETF approval meant that a bitcoin spot ETF approval should also have been forthcoming. Sonnenshein stated that by definition, bitcoin futures were a derivative of the spot market, and that there could be no argument about this. He said that there was a 99% correlation between the futures and the spot markets.
If the SEC’s claim that the bitcoin spot market was “manipulated” then how would this not affect the futures product?
Also, if the SEC was comfortable with a bitcoin futures product then surely it must also have been able to approve an ETF for the underlying spot market product.
What next?
The decision on whether or not the SEC ruling on the grayscale bitcoin ETF will be overturned is not expected to arrive until Autumn of this year. Even if grayscale is successful in its case and the 3 judges rule in its favour, the SEC still has possibilities open to it.
One of these possibilities is that the SEC goes back to the drawing board and thinks up another way of disallowing a bitcoin spot ETF. Yet another way is to decide to disallow all forms of ETFs, which would mean rescinding the bitcoin futures ETFs.
