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Grayscale Taps Ex-Obama Lawyer to Argue Its Case Against SEC

2 mins
Updated by Kyle Baird
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In Brief

  • Grayscale Investments LLC taps former solictor general to help strengthen its case against the SEC.
  • Grayscale's argument hinges on the Administrative Procedures Act that prevents two similar situations from being treated differently.
  • Donald Verrilli, 64, has successfully argued two landmark cases for the U.S. government.
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Grayscale Investment LLC acquires a new secret weapon in the form of former solicitor-general Donald Verrilli, who worked in the Obama administration from 2011 to 2016.

Grayscale Investments LLC has brought on board Donald Verrilli, a top legal expert, as the company weighs a possible rejection of its application to the Securities and Exchange Commission to convert its Grayscale Bitcoin Trust to a physically-backed bitcoin ETF.

Grayscale CEO Michale Sonnenshein has clarified that “all options are on the table” should the SEC reject its application, previously threatening a lawsuit against the agency if its application got rejected. A decision from the SEC is expected on July 6, 2022.

“In the name of being prepared for all possible outcomes, if one option is potentially bringing a lawsuit against the SEC, well, what better person to have as a legal strategist than somebody who has represented the U.S. government,” Craig Salm, Grayscale’s chief legal officer, told Bloomberg.

Grayscale bring on the big guns

In hiring Verrilli, Grayscale, the world’s largest digital asset manager, joins a host of crypto companies camping out at Washington’s revolving door. In April 2022, Astra Protocol hired former Department of Homeland Security head Kirstjen Nielsen as a strategic adviser to help them understand the risk landscape in decentralized finance. Mick Mulvaney, a former Trump special envoy to Northern Ireland, previously joined Astra Protocol to help theft craft a way forward in Web3. Former Treasury Secretary Larry Summers already serves as an adviser to the Digital Currency Group, the holding company behind Grayscale.

Verrilli has been working with Grayscale’s legal team and external attorneys, Davis Polk & Wardwell, to prepare for a possible faceoff with the SEC in court. Their preparation involves legal arguments around the Administrative Procedures Act, which essentially contends that the SEC cannot favor one situation and reject another if both situations are alike. Put simply, it cannot treat bitcoin futures ETFs and bitcoin spot ETFs differently. Grayscale argues that approving a bitcoin futures ETF because such a product meets the criteria of the Investment Company Act of 1940 and rejecting a spot bitcoin ETF because it fails to qualify under the Securities Exchange Act of 1934 violates the APA.

Hence it hopes to draw on Verrilli’s “strong background experience” in APA cases to strengthen its argument.

Verrilli’s credentials

While serving under the Obama administration, Verrilli successfully fought for the government in Supreme Court cases regarding the equality of same-sex marriage and the Patient Protection and Affordable Care Act. He has argued 37 cases before the Supreme Court during his tenure as solicitor general, one tier below the attorney general’s office.

Verrilli’s hire entrenches Grayscale’s pledge to do whatever it takes to convert its bitcoin trust into an ETF, potentially unlocking $8B for investors.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...