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Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.

Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

In a new court filing, digital asset management company Grayscale blasted the U.S. securities regulator for its "illogical" and "fundamentally unreasonable" argument against approving a spot bitcoin exchange-traded fund (ETF).

The document filed on Friday was in response to the Securities and Exchange Commission's (SEC) December defense of its decision to reject Grayscale Investment’s application to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF.

On June 29, 2022, the same day the SEC rejected its application, Grayscale filed a lawsuit requesting the U.S. Court of Appeals for the District of Columbia Circuit review the order. Although a number of industry players rallied around Grayscale, the SEC stood by its rejection of the conversion, which would have allowed investors to hold bitcoin directly.

While the SEC has approved multiple applications to set up futures-based bitcoin ETFs, which are trade agreements to be executed at a future date and price, the regulator has said spot bitcoin ETFs are vulnerable to “fraudulent and manipulative conduct."

Grayscale countered that argument Friday. It said that "a successful manipulation of prices in the spot bitcoin market would necessarily affect the price of bitcoin futures as well – and, therefore, the value of bitcoin futures ETPs’ holdings." Grayscale called the SEC's reasoning "illogical."

Grayscale also accused the SEC of exceeding its statutory authority, saying the agency "is not permitted to decide for investors whether certain investments have merit."

Final briefs on the case are due Feb. 3, after which three judges will be selected and the court will share a schedule for the lawsuit’s oral arguments, Grayscale Chief Legal Officer Craig Salm said in a separate blog post. He added that a final decision on the case could come by the fall.

Grayscale's parent company, Digital Currency Group (DCG), and its founder and CEO, Barry Silbert, have come under increasing pressure to do something about GBTC's large discount to net asset value.

DCG is also the parent company of CoinDesk.


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Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.


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Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.