Grayscale, a global digital asset management firm, and the entire investment community were waiting for the United States Securities and Exchange Commission (SEC) to decide on whether it would approve the company for the conversion of $GBTC into a Bitcoin(BTC) spot ETF.

The U.S. SEC finally decided to reject the October 2021-filed BTC spot ETF application from Grayscale as of June 2022.

Why is the SEC Blocking Spot ETFs?

According to the regulatory body, Grayscale failed to present the “means to prevent fraudulent and manipulative acts and practices sufficient to justify dispensing with the detection and deterrence of fraud and manipulation that is provided by a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin.”

Moreover, the SEC has also declined the application for Bitwise BTC spot ETF as well by citing that almost every spot ETF applicant, including Grayscale and Bitwise, failed to showcase that “the bitcoin market as a whole or the relevant underlying bitcoin market is uniquely and inherently resistant to fraud and manipulation.”

Contradictions at the SEC

On the other hand, as we previously reported, the regulatory authority has recently approved the Short Bitcoin(BTC) Strategy ETF by ProShares. The US now has several Bitcoin(BTC) future ETFs, a short BTC ETF, and a mutual fund as well, but there is still no clear path for a spot Bitcoin(BTC) ETF.

The unpleasant decision has made Michael Sonnenshein, CEO of Grayscale, file a lawsuit against the regulatory body with the United States Court of Appeals for the District of Columbia Circuit.