Effort to Reverse Bitcoin Fund Rejection Wins Broad Crypto Industry Support

Three major, crypto industry trade groups have filed an amicus brief supporting a Grayscale Investments lawsuit against the Securities and Exchange Commission (SEC) for rejecting the firm's proposal for a spot bitcoin exchange traded fund (ETF).

In the brief submitted Tuesday to the U.S. Court of Appeals for the District of Columbia Circuit, the Blockchain Association, the Chamber of Digital Commerce and Coin Center noted that the SEC had "categorically denied every proposal to list an exchange traded product (ETP)" that tracks bitcoin's spot price, despite approving multiple Bitcoin futures ETPs.

"The Commission's 'thumb on the scale' approach does not withstand scrutiny," the groups said, calling spot Bitcoin ETPs "ideally suited for investors that desire exposure to Bitcoin. The groups added that the SEC had allowed "similar, riskier products to enter the market," and that spot ETPs plainly satisfy regulatory requirements for listing on national exchanges," similar to Bitcoin futures ETPs.

Grayscale is a subsidiary of Digital Currency Group, CoinDesk's parent company.

In June, the SEC denied Grayscale's application to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange traded fund (ETF). Grayscale filed a lawsuit against the agency, asking the the District of Columbia Circuit court to review the regulator’s decision.

In an opening legal brief submitted last week, Grayscale called the SEC's rejection “arbitrary, capricious, and discriminatory."

Proponents of a spot bitcoin ETF approval have argued the product would offer a low-cost, easily accessible way for individuals and institutions to invest in bitcoin. Grayscale has argued forcefully that it is inconsistent to approve an ETF based on bitcoin futures but not allow one based on the underlying investment.