The Securities and Exchange Commission (SEC) risks violating the Administrative Procedure ActKiana Griffin
The CEO of Grayscale Investments explains that the U.S. Securities and Exchange Commission (SEC) could potentially violate the Administrative Procedure Act if it does not approve a spot exchange-traded fund (ETF).
The U.S. Securities and Exchange Commission (SEC) has approved not one, but two different Bitcoin futures exchange-traded funds (ETF) structures. This has led to optimism in the crypto industry that the securities watchdog is closer to approving a spot bitcoin ETF. The first structure uses the Investment Company Act of 1940 (Act 40). Most Bitcoin ETF futures offered to date have been filed under this law. The second uses the Securities Act of 1933 (Act 33). The Teucrium Bitcoin Futures ETF was approved earlier this month using the latest structure.
Grayscale Investments CEO Michael Sonnenschein explained to CNBC last week:
“From the perspective of the Securities and Exchange Commission, there were several protections that are in the products of 40 Act that 33 (the Securities Act of 1933) do not have, but never these protections have ever taken into account the concerns of the Securities and Exchange Commission about bases.
He continued, “So the fact that they are now evolving their thinking and endorsing the 33 Act product with Teucrium really invalidates that argument and speaks to the connection between bitcoin futures and the underlying bitcoin spot markets that give futures their value.” Sonnenschein opined:
“If the Securities and Exchange Commission cannot consider two similar matters, a futures ETF and a spot ETF, through the same lens, then this, in fact, is potentially grounds for violating the Administrative Procedure Act.”
The Administrative Procedure Act (APA) governs the process by which federal agencies develop and issue regulations. Grayscale filed with the Securities and Exchange Commission last October 19 to convert its flagship bitcoin trust (GBTC) into a bitcoin ETF. GBTC is Grayscale’s largest product with nearly $26 billion in assets under management as of April 15. If approved by the Securities and Exchange Commission, GBTC will be listed on the New York Stock Exchange and not OTCQX.
The company is awaiting a response from the Securities and Exchange Commission in early July on whether the application will be approved. The CEO has hinted that suing the Securities and Exchange Commission is a possible option the company will take if the agency does not approve the GBTC conversion. Commenting on whether the SEC would approve a spot bitcoin ETF, Sonnenschein stressed:
“In our view, it’s a question of ‘when’.”