Grayscale Bitcoin Trust (GBTC), a leading crypto asset manager, has achieved a significant legal triumph against the U.S. Securities and Exchange Commission (SEC) in its bid to transform its GBTC application from an over-the-counter product to a listed Bitcoin exchange-traded fund (ETF).
Court Orders Review and Denial Vacated
In a recent development reported on August 29, U.S. Court of Appeals Circuit Judge Neomi Rao has issued an order granting Grayscale’s request for a review and vacating the SEC’s previous decision to reject the GBTC listing application. The court had previously criticized the SEC for its lack of explanation for the denial.
While this decision marks a victory for Grayscale, it does not ensure the immediate listing of a Grayscale spot Bitcoin ETF. The outcome hinges on subsequent actions and processes.
Grayscale’s Response and Background
Michael Sonnenshein, CEO of Grayscale Investments, has stated on Twitter that their legal team is actively evaluating the court’s opinion. The legal battle stemmed from the SEC’s denial of Grayscale’s application on June 29, 2022, prompting Grayscale’s appeal through the legal channels.
🚨 JUST IN 🚨
The D.C. Circuit ruled in favor of @Grayscale in our lawsuit challenging the SEC's decision to deny $GBTC's conversion to an ETF!
Thank you to everyone who has been on this journey with us, especially our investors. We are grateful for your support and…
— Sonnenshein (@Sonnenshein) August 29, 2023
With over $14 billion in assets under management, Grayscale Bitcoin Trust is the largest Bitcoin fund traded over the counter. The legal dispute had previously led to a nearly 50% discount on GBTC shares compared to their net asset value due to uncertainties around the SEC litigation and concerns about its parent company, Digital Currency Group (DCG).
Challenges and Developments
Grayscale’s relationship with its partner and digital currency broker, Genesis Global, underwent significant changes as material agreements were terminated in October 2022. Withdrawals were paused by Genesis Global in November 2022 due to market turbulence linked to the collapse of cryptocurrency exchange FTX and the distress of Singaporean crypto hedge fund Three Arrows Capital.
Digital Currency Group, which is Grayscale’s parent company, disclosed in January 2023 that it owes creditors over $3 billion and is contemplating a $500 million sale of its venture capital portfolio. Genesis Global, a subsidiary of DCG, owes $900 million to users of cryptocurrency exchange Gemini’s Earn program.
