With the SEC’s recent approval of Teucrium’s bitcoin ETF application, Grayscale lawyers are turning up the heat against the regulatory watchdog, by lobbying for early conversion of its pending ETF application, citing inconsistencies in the SEC’s list of approvals.
Lawyers representing the world’s largest digital asset manager have sent a letter to the SEC, arguing that its bitcoin spot ETF is no different from a Teucrium bitcoin futures ETF, approved earlier this month.
“We believe that the Teucrium order confirms the fundamental point made in our November 29, 2021 letter…[w]hen it comes to approving ETPs, there is not a basis for treating spot bitcoin products differently from Bitcoin futures products,” reads a letter from Davis Pol & Wardwell.
The November 2021 letter also challenges the notions of fraud and market manipulation offered by SEC chair Gary Gensler, saying that the SEC has never been able to prove a difference between market manipulation risk in the futures market and the spot market.
“If anything, derivatives markets present additional opportunities for manipulation on top of spot markets, which is why the derivatives markets have an additional layer of federal regulation, to begin with,” the letter reads.
Currently, Gensler has held off on approving spot ETFs, as be believes the bitcoin markets are ripe for manipulation and abuse. In his letter, he said that both spot and futures-based Bitcoin products “face exposure to the same underlying Bitcoin market, any fraud or manipulation in the underlying market will affect both products in the same way.”
Earlier this month, the SEC approved Teucrium to issue a bitcoin futures ETF, which is distinguished by its filing under the Securities Exchange Act of 1933 – rather than the Investment Company Act of 1940, which other companies have previously filed their applications under.
Bloomberg Analyst James Seyffart tweeted earlier this year that filing an ETF application, such as the Teucrium ETF, under the 1933 act could pave the way for a bitcoin spot ETF approval.
A future Grayscale lawsuit against the SEC?
The SEC will rule on Grayscale’s application in July later this year. Attorney Timothy Spangler, a partner at Dechert, has said that countries like Canada and Australia have already determined that “bitcoin is a mature enough asset to be included in a publicly-traded vehicle.”
“I fear that the opposition to including broader amounts of crypto in retail financial products is more philosophical than has to do with specifics,” he added.
In the meantime, Grayscale CEO Michael Sonnenshein has said that legal action against the SEC is a distinct possibility should their application get denied.
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