Bitcoin ETP Sponsor Appeals SEC Order Denying Exchange Listing

Grayscale Investments, LLC, sponsor of Grayscale Bitcoin Trust, petitioned the U.S. Court of Appeals for the D.C. Circuit to review an SEC Order disapproving the listing of Grayscale Bitcoin Trust, which holds bitcoin directly on the NYSE Arca Exchange.

The petitioner argued that the SEC's rejection of the listing is inconsistent with the SEC's allowing of the listing of exchange-traded products ("ETPs") holding bitcoin futures. As previously covered, the SEC denied the sponsor's request to list Grayscale Bitcoin Trust on the ground that the exchange had not met its burden in creating a way to prevent manipulation of the underlying asset.

The petitioner argued that the SEC's denial of the listing violates the Administrative Procedure Act because it is "arbitrary on its own terms and contrary to the Exchange Act's prohibition against discrimination among issuers." The petitioner argued that the SEC had previously allowed the listing of bitcoin futures ETPs and, therefore, should allow the listing of spot bitcoin ETPs considering that the two are connected and spot bitcoin ETPs are as safe as bitcoin futures ETPs, less complex and offer similar benefits.

Additionally, the petitioner said that the SEC was unfairly discriminatory when it relaxed its significant-market test criteria in evaluating the bitcoin futures ETPs, but did not extend that same privilege to the proposed spot bitcoin ETPs. The petitioner argued that the SEC's Order prohibiting the listing of Grayscale Bitcoin Trust not only hurt the sponsor, but also the hundreds of thousands of investors that had invested in the products it offered. The petitioner asked the court to review and vacate the Order.