[2022-03-28] Grayscale Threatens Legal Action if SEC Rejects Bitcoin ETF bid

[bbc.reporter]

According to other articles, legal action from Grayscale would begin on July 6 if they do not approve the trust's conversion bid from GBTC to an ETF. I am not quite sure about their desperation. However, if Barry Silbert is successful, I speculate this might cause others to create their own bitcoin trust fund for application to convert to an ETF hehehe..


Barry is ready to file the lawsuit

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said.

“I think all options are on the table,” Sonnenshein said during an interview with Bloomberg Monday when asked if Grayscale would consider an Administrative Procedure Act lawsuit if their application to convert the Grayscale Bitcoin Trust (GBTC) into an ETF is denied.

Read in full https://blockworks.co/grayscale-threatens-legal-action-if-sec-rejects-bitcoin-etf-conversion-bid/

[NeuroticFish]

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said.

While it sounds interesting (and maybe intriguing), it means nothing.
You know, "verba volant"; it's just words. It can be seen as a "political" declaration. I read it like: if SEC denies the ETF, Grayscale may or may not fill legal action

However, it can indicate a certain amount of the pressure (which SEC may or may not take into account).
Just until July (did I understand right, is it so late?) everybody would have forgotten these declarations.

[cr1776]

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said.

While it sounds interesting (and maybe intriguing), it means nothing.
You know, "verba volant"; it's just words. It can be seen as a "political" declaration. I read it like: if SEC denies the ETF, Grayscale may or may not fill legal action

However, it can indicate a certain amount of the pressure (which SEC may or may not take into account).
Just until July (did I understand right, is it so late?) everybody would have forgotten these declarations.

I think you are right.  It does put some political pressure on them and could (I don't know the odds) have some chance of success if the SEC were to be found to be acting arbitrarily for example.  The administrative state structure is an issue for just this reason - you don't have elected people making the decisions, you have unelected bureaucrats making a decision without much in the way of checks and balances except via the courts.

[bbc.reporter]

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said.

While it sounds interesting (and maybe intriguing), it means nothing.
You know, "verba volant"; it's just words. It can be seen as a "political" declaration. I read it like: if SEC denies the ETF, Grayscale may or may not fill legal action

However, it can indicate a certain amount of the pressure (which SEC may or may not take into account).
Just until July (did I understand right, is it so late?) everybody would have forgotten these declarations.

I am also skeptical like you, unless Grayscale's lawyers found something under the rules that they might use to force an approval of the conversion. However, yes, this might only be a desperation effort for public support. Let us wait for July 6 if the decision will cause a pump or a dump hehehehehe. We cannot be certain what the market might be on July, however. The market does not pump 100% of the time on good news.

[cr1776]

Grayscale is not ruling out seeking legal action against the Securities and Exchange Commission if the agency continues to prohibit the launch of a spot cryptocurrency ETF, CEO Michael Sonnenshein said.

While it sounds interesting (and maybe intriguing), it means nothing.
You know, "verba volant"; it's just words. It can be seen as a "political" declaration. I read it like: if SEC denies the ETF, Grayscale may or may not fill legal action

However, it can indicate a certain amount of the pressure (which SEC may or may not take into account).
Just until July (did I understand right, is it so late?) everybody would have forgotten these declarations.

I am also skeptical like you, unless Grayscale's lawyers found something under the rules that they might use to force an approval of the conversion. However, yes, this might only be a desperation effort for public support. Let us wait for July 6 if the decision will cause a pump or a dump hehehehehe. We cannot be certain what the market might be on July, however. The market does not pump 100% of the time on good news.

They could certainly argue it is arbitrary and capricious and certainly if the SEC didn't have a valid reason a court could impose a remedy.  Given the political nature of the left-leaning judges, much would depend on the judge that hears the case initially and then which group of circuit court judges hears the appeal, unless it was en banc.

[NeuroticFish]

They could certainly argue it is arbitrary and capricious and certainly if the SEC didn't have a valid reason a court could impose a remedy.  Given the political nature of the left-leaning judges, much would depend on the judge that hears the case initially and then which group of circuit court judges hears the appeal, unless it was en banc.

Iirc SEC has already rejected ETFs for the reason that Bitcoin market is not mature enough, telling that the price fluctuates too much and the exchanges are showing overly inflated fake volumes.
And while I don't like to hear it, they're right about that. On the other hand, is that a good enough reason for rejecting the ETF? That may be a lottery game with the only winners being the lawyers paid big for the lawsuit.

[cr1776]

They could certainly argue it is arbitrary and capricious and certainly if the SEC didn't have a valid reason a court could impose a remedy.  Given the political nature of the left-leaning judges, much would depend on the judge that hears the case initially and then which group of circuit court judges hears the appeal, unless it was en banc.

Iirc SEC has already rejected ETFs for the reason that Bitcoin market is not mature enough, telling that the price fluctuates too much and the exchanges are showing overly inflated fake volumes.
And while I don't like to hear it, they're right about that. On the other hand, is that a good enough reason for rejecting the ETF? That may be a lottery game with the only winners being the lawyers paid big for the lawsuit.

That is what they are saying, true.   Thinking as their law firm, my argument would go something like this:  Is the market mature enough?  As their attorney [not that I am of course lol], I would say that seems very subjective and consequently arbitrary.   Fake volumes, sure on some, but I don't think that is the case with ones like Coinbase.  I could be wrong, but I'd make that argument that, sure, some exchanges are showing fake/inflated volumes, but there are stock exchanges doing the same and "we wouldn't be using anything but reputable exchanges such as X,Y, and Z."  Likewise, regarding fluctuation, I'd make the argument that if you look at many futures or options markets, they are much more volatile than bitcoin given the amount of leverage involved.

I'd also argue that having an ETF (or more than 1) would help stabilize the prices because the volume could increase significantly.  The ETFs would wag the exchange price vs the exchange price wagging the ETF.

I would also make the argument to the Biden administration (Ditto Obama and Trump before): does the US want to be at the forefront of crypto or lagging?  Does the US want to be taking the same side as authoritarians the world over or supporting people who want the freedom to make their own decisions?  (That wouldn't help with this admin).  It is like online gaming today.  The US had the opportunity to embrace it and be involved instead of driving it overseas and offshore.  e.g. casino.com and gamble.com could have US based casinos on them or something vs whatever is on there now.

In a free country, one should not have to ask for permission to do everything or even most things. 

:-)

[bbc.reporter]

They could certainly argue it is arbitrary and capricious and certainly if the SEC didn't have a valid reason a court could impose a remedy.  Given the political nature of the left-leaning judges, much would depend on the judge that hears the case initially and then which group of circuit court judges hears the appeal, unless it was en banc.

Iirc SEC has already rejected ETFs for the reason that Bitcoin market is not mature enough, telling that the price fluctuates too much and the exchanges are showing overly inflated fake volumes.
And while I don't like to hear it, they're right about that. On the other hand, is that a good enough reason for rejecting the ETF? That may be a lottery game with the only winners being the lawyers paid big for the lawsuit.

I reckon that it might be Gary Gensler who does not want a bitcoin ETF for whatever reason. I speculate that it is not because of the market not being mature enough or the assumptions of market manipulation. It might be that there are people who are behind the SEC who do not want bitcoin to reach a certain level of public acceptance.

[NeuroticFish]

As their attorney [not that I am of course lol], I would say that seems very subjective and consequently arbitrary.

Indeed, it's subjective. Whether a market is mature or not cannot be properly quantified. However, I find that it's pretty much a requirement, else, as @bbc.reporter correctly noted, market manipulation would cause a lot of drama (and maybe lawsuits too). But is Forex or stock market really-really mature and with no manipulations? Prove it!

And that's why my point was that the only ones with actual gains will be the lawyers with fat paychecks.

I'd also argue that having an ETF (or more than 1) would help stabilize the prices because the volume could increase significantly.

This is imho wishful thinking. If there are no sellers, the volumes cannot rise. Even more, if the volumes will be correctly reported, they may go even lower.
Also keep in mind that (afaik) there are 2 kinds of ETFs and only one is backed with actual BTC reserve, hence with correct effect on the market. And by correct I mean that some will try to manipulate the bitcoin market so they can earn more on the financial one.
Market stabilization may be achieved if more institutions will invest and the price will be even higher. But I cannot be that sure.

I would also make the argument to the Biden administration (Ditto Obama and Trump before): does the US want to be at the forefront of crypto or lagging?  Does the US want to be taking the same side as authoritarians the world over or supporting people who want the freedom to make their own decisions?  (That wouldn't help with this admin).

I don't feel US far behind, with or without the ETF. This was a good argument before Michael Saylor and Co...

---
Yes, I've plaid devil's advocate here. I am not against ETF, but imho one can build a good case whether is pro or against it.

[cr1776]

As their attorney [not that I am of course lol], I would say that seems very subjective and consequently arbitrary.

Indeed, it's subjective. Whether a market is mature or not cannot be properly quantified. However, I find that it's pretty much a requirement, else, as @bbc.reporter correctly noted, market manipulation would cause a lot of drama (and maybe lawsuits too). But is Forex or stock market really-really mature and with no manipulations? Prove it!

And that's why my point was that the only ones with actual gains will be the lawyers with fat paychecks.

I'd also argue that having an ETF (or more than 1) would help stabilize the prices because the volume could increase significantly.

This is imho wishful thinking. If there are no sellers, the volumes cannot rise. Even more, if the volumes will be correctly reported, they may go even lower.
Also keep in mind that (afaik) there are 2 kinds of ETFs and only one is backed with actual BTC reserve, hence with correct effect on the market. And by correct I mean that some will try to manipulate the bitcoin market so they can earn more on the financial one.
Market stabilization may be achieved if more institutions will invest and the price will be even higher. But I cannot be that sure.

I would also make the argument to the Biden administration (Ditto Obama and Trump before): does the US want to be at the forefront of crypto or lagging?  Does the US want to be taking the same side as authoritarians the world over or supporting people who want the freedom to make their own decisions?  (That wouldn't help with this admin).

I don't feel US far behind, with or without the ETF. This was a good argument before Michael Saylor and Co...

---
Yes, I've plaid devil's advocate here. I am not against ETF, but imho one can build a good case whether is pro or against it.

I agree, I don't think that the US is far behind now, not really at all.  And the number of companies and people involved has only grown so the more that happens the more difficult it would be to "make bitcoin illegal" like people have claimed about various places over the years.  I just like competition because everyone benefits.

As far as the ETFs go, yes, I meant a "physical" backed ETF vs a futures backed one.  The futures one is better than nothing, but not much given the costs etc.  If you have a net positive demand $X/day from a "physical" ETF, then that will help demand at whatever exchange(s) are being used to fulfill the ETF orders and then at least in theory there will be market arbitrage to equalize prices everywhere.  Obviously it is all theoretical, but in general if you have positive demand from the ETF, it should increase the fiat price over time.

And devil's advocacy is a good thing because it helps to clarify points.


:-)