Grayscale tells SEC ‘no basis’ to approve Bitcoin futures ETFs and not spot ETFs

Grayscale Investments has reacted to the U.S Securities and Exchange Commissions (SEC), rejection of VanEck’s spot Bitcoin ETF Application.

On Nov. 29, the Grayscale Bitcoin Trust (GBTC), operator, wrote to Vanessa Countryman, Secretary of the SEC. Countryman argued that the SEC was wrong to reject spot Bitcoin ETFs because it has approved three Bitcoin futures exchanges ETFs, one each by VanEck, Valkyrie and ProShares.

Grayscale claims that investors should not be allowed to invest in derivatives markets for assets, while they are prohibited from investing in the asset.

It alleges that the SEC failed to treat two Bitcoin ETF products equally under the Administrative Protections Act.

A Bitcoin futures ETF allows traders the ability to speculate on Bitcoins future price (BTC) using derivatives. A spot Bitcoin ETF allows traders the ability to trade on the current value of the asset and functions in the same way as holding it.

Grayscale is not a neutral party. Grayscale filed an October application to list GBTC spot ETF. A decision could be made as early as Christmas Eve. VanEcks application was rejected by the SEC on Nov. 12. It was found to not be consistent with the Securities Exchange Act of 1934 (Exchange Act).

Grayscale does not agree with these grounds of rejection.

“We believe that this rationale did not adequately take into account significant regulatory and competitive developments, since 2017, when the Commission considered and denied a national securities exchange’s application to trade shares of a spot Bitcoin ETP.

Grayscale believes that the SEC approved Bitcoin futures ETFs. This allowed applicants to bypass Section 6(5)(b), which is required by the Exchange Act for applicants to Bitcoin spot ETFs.

Section 6(5)(b), which is intended to “protect investors” and “protect the public interest”, prevents fraud and market manipulation, and disallows “unfair discrimination among customers, issuers brokers or dealers.”

Related: Invesco launches spot Bitcoin ETP on Deutsche Borse

Grayscale predicted that the Bitcoin spot ETF would be listed by July 2022. However, it is not clear if that prediction will come true.

GBTC manages approximately $37.1 billion in assets and has 692,370,000.100 shares outstanding.