SEC’s Case Against A Spot Bitcoin ETF Has Weakened- Grayscale CEO

Grayscale CEO Michael Sonnenshein said the SEC’s argument against an exchange-traded fund (ETF) that directly tracks Bitcoin has “significantly weakened. He cited the regulator’s recent approval of a Bitcoin futures ETF as a key factor behind his reasoning.

The U.S. Securities and Exchange Commission on Wednesday allowed fund managers NYSE Arca and Teucrium to issue an ETF tracking Bitcoin futures, the fourth such approval. Grayscale, VanEck, and Valkyrie are the other three operators of their own ETFs.

But the regulator has repeatedly shot down proposals for a spot Bitcoin ETF, citing concerns over investor protection and uncertainty over the classification of crypto.

SEC’s case against a spot ETF weakens

In a series of tweets, Sonnenshein noted a contradiction in the SEC’s recent approval of the Teucrim ETF, which weakens its argument against a spot ETF. The regulator has repeatedly cited investor protection mandates from a 1940 law to reject applications for a spot ETF.

But the Teucrim ETF is registered under a different bill- one from 1933. This indicates that the SEC’s citation of the 1940 act may hold less water.  Sonnenshein said Grayscale will pursue this line of reasoning in its application for a spot Bitcoin ETF.

If the SEC is comfortable with a #Bitcoin futures #ETF, they must also be comfortable with a spot Bitcoin ETF. And they can no longer justifiably cite the ‘40 Act as being the differentiating factor.

-Grayscale CEO Michael Sonnenshein

Grayscale has threatened to take the SEC to court if its next such proposal is denied. The fund has also repeatedly lobbied for the approval of its spot ETF, even fielding public comments for its application, which is currently under review.

Spot Bitcoin ETF in 2022?

Canada and Europe already allow the trade of products that directly track digital assets. These derivatives have proven to be vital in attracting institutional capital into crypto.

The SEC is yet to soften its rhetoric against crypto and a directly exposed ETF. But with growing crypto adoption and friendly Federal regulation, the regulator could eventually change its tone.

President Joe Biden’s executive order last month was seen as a major step forward for U.S. crypto regulation. It will also see U.S. federal agencies collaborate over passing “constructive” crypto regulation.