Grayscale Challenges SEC for Spot Bitcoin ETF Conversion


  • The US District Court of Appeals is set to hear Grayscale’s arguments against the SEC’s ruling to reject its spot Bitcoin ETF application on March 7.
  • Grayscale claims that a spot Bitcoin ETF is no different from a futures ETF and should not be grounds for disapproval, while the SEC believes there is greater risk of fraud with spot ETFs.
  • Judges are expected to reach a final decision in the coming months, with Bloomberg analysts believing there is less than 50% chance of overturning the SEC’s ruling.


In June 2022, the U.S. Securities and Exchange Commission (SEC) rejected Grayscale’s application for a spot Bitcoin exchange-traded fund (ETF). The SEC argued that such an investment product carries a greater risk of fraud and does not sufficiently protect investors. Grayscale disagreed and immediately sued the SEC, appealing its decision in court.


Grayscale’s appeal is based on the argument that a spot Bitcoin ETF is no different from a futures ETF — which has already been approved by the SEC — and therefore should not be grounds for disapproval. The SEC believes otherwise as it argues that futures contracts are traded on public exchanges like the Chicago Mercantile Exchange (CME), which are supervised by federal regulators and have various tools in place to detect fraud and price manipulation. Grayscale maintains that both spot and futures ETFs rely on Bitcoin’s price and thus carry the same levels of risk regardless of where they are traded.

Court Ruling

U.S. District Court of Appeals judges will listen to both parties‘ arguments starting March 7, 2023, with a final decision expected in coming months. Bloomberg analysts believe there is less than 50% chance of overturning the SEC’s ruling due to CME surveillance being sufficient when it comes to futures-based ETFs — however it remains uncertain whether such surveillance will work for spot ETFs in the same way. Despite this uncertainty, Grayscale’s lead counsel Don Verrilli expressed confidence in their case stating „the most basic way i can put it [is]…the [SEC] takes similar things and treats them differently“.


The outcome of this legal battle could have great implications for both retail investors who wish to gain exposure to digital assets as well as institutional investors looking for easier access into crypto markets . If successful , this could open up new opportunities for investment products such as cryptocurrency index funds or actively managed funds , offering retail investors more options when investing in digital assets .


The U.S District Court of Appeals will hear both sides‘ arguments starting today regarding Grayscale’s appeal against the SEC’s rejection of its spot Bitcoin ETF application . Depending on how judges decide , this could potentially open up new avenues for institutional investors seeking easier access into crypto markets as well as more options available to retail investors wanting exposure to digital assets .