Grayscale Would Consider APA Lawsuit if SEC Rejects its Bitcoin ETF Conversion Application, Says CEO

Michael Sonnenshein. Source: a video screenshot, Bloomberg Technology / YouTube

 

The US-based major cryptoasset management firm Grayscale CEO Michael Sonnenshein has suggested that the fund manager may take legal actions against the US Securities and Exchange Commission (SEC) if the agency rejects the former's bid to convert its Bitcoin (BTC) trust into an exchange-traded fund (ETF).

“I think all options are on the table come July,” Sonnenshein said in an interview with Bloomberg after the reporter asked him whether he "would look into the option of an APA lawsuit."

According to Patel Law Group, filing a Federal Lawsuit under the Administrative Procedure Act (APA) is a way in which groups or individuals can "challenge unlawful agency action."

The SEC's deadline to rule on Grayscale's proposal to convert its flagship fund, Grayscale Bitcoin Trust (ticker GBTC), into a spot Bitcoin ETF is July 6.

Grayscale first filed an application to convert the GBTC fund into a spot bitcoin ETF in April 2021. Now, the world’s largest digital currency asset manager said it remains committed to doing so.

“The Grayscale team has been putting the full resources of our firm behind converting GBTC, our flagship fund, into an ETF,” Sonnenshein said. “It’s really important that investors know that we have and will continue to advocate for them.”

In early February, the SEC issued a notice asking for public comment regarding Grayscale’s application. According to the fund manager, investors have shown support for the product with around 2,700 letters submitted to the SEC so far.

Notably, the SEC has approved Bitcoin derivatives-backed ETFs. However, the agency has remained skeptical of a physical Bitcoin ETF, consistently denying applications. In its denials, the regulatory body has cited concerns about the potential for fraud and manipulation in the underlying market for bitcoin.

Just earlier this month, the SEC rejected spot Bitcoin ETF applications from the New York Digital Investment Group (NYDIG) and fund manager Global X.

Furthermore, the agency said NYSE Arca has failed to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6, particularly the requirement that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”

Meanwhile, the Grayscale Bitcoin Trust currently trades at around a 27% discount to net asset value (NAV), meaning investors have the opportunity to get Bitcoin exposure at below-market prices.

Should the GBTC be converted to an ETF, current GBTC holders would be able to sell at inflated prices, garnering impressive gains. According to Sonnenshein, this provides long-term investors with a "big and exciting potential."

“It’s a matter of when, not a matter of if, a spot Bitcoin ETF is approved,” Sonnenshein said.

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