Grayscale: The SEC must get comfortable with spot Bitcoin ETF ๐จ This article is 3 years old...
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Grayscale: The SEC must get comfortable with spot Bitcoin ETF
With the approval of a fourth Bitcoin futures ETF, SECโs arguments for rejecting spot Bitcoin ETFs are running thin, according to Grayscale CEO Michael Sonnenshein.
2 min read
Updated: Jun. 30, 2023 at 10:34 pm UTC
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Michael Sonnenshein, CEO of the largest bitcoin and crypto fund Grayscale, has argued that the SEC’s justifications of why it approved Bitcoin futures ETFs but not spot ETFs, don’t add up.
The plot thickens on the path to $GBTCโs spot #Bitcoin #ETF conversionโฆ
— Sonnenshein (@Sonnenshein) April 7, 2022
The tweet was posted moments after the U.S. Securities and Exchange Commission (SEC) officially approved another Bitcoin futures Exchange Traded Fund (ETF) โ the Teucrium ETF โ totaling four ETFs in the U.S. market.
ETFs are financial products that follow the value of an underlying asset, in this case, Bitcoin (BTC).
โToday, the SEC approved another US-based Bitcoin futures ETF. Great, right? We agree. But it’s important to realize that not all Bitcoin futures ETFs are created equal,โ
Sonnenshein continued on twitter.
Over 80-year-old set of regulations
Prior to this latest approval by the SEC, the U.S. had three Bitcoin futures ETFs: BITO, XBTF, and BTF. Each of these holds Chicago Mercantile Exchange (CME) Bitcoin futures and are registered under the so-called ’40 Act โ an over 80-year-old set of regulations that govern many investment products on the market today.
As of today, those arguments have been significantly weakened as the SEC approved the Teucrium #Bitcoin Futures ETF, which is registered under the '33 Act, and not the โ40 Act.
— Sonnenshein (@Sonnenshein) April 7, 2022
Sonnenshein continues to examine the potential impact to spot bitcoin ETF applicants, including, not surprisingly, Grayscale’s own application.
First, the SEC has a weaker argument that the different protections & standards that apply to the โ40 Act vs. the โ33 Act are reasons for denying spot #Bitcoin #ETFs, despite using that argument for every single spot Bitcoin ETF denial since Bitcoin futures ETFs started trading.
— Sonnenshein (@Sonnenshein) April 7, 2022
Whatโs a โregulated market of significant sizeโ?
Sonnenshein also argued that the SEC made interesting commentary on the Teucrium approval, particularly concerning what it refers to as โregulated markets of significant sizeโ.
Historically, the SEC asserted that the absence of regulated markets of significant size related to the underlying assets โ i.e. bitcoin โ was a critical and/or missing element to the approval of a spot bitcoin ETF.
โToday, in approving Teucriumโs application under the โ33 Act, the SEC cleverly decided to define the โmarketโ as just the CME Group and the โunderlying assetsโ as just CME bitcoin futures, which of course makes CME significant since it [has] 100% of the CME bitcoin futures market!โ
According to Sonnenshein, who also said:
โWhatโs wrong with this argument? Well, digging deeper, letโs remember that CME bitcoin futures are priced based on spot Bitcoin markets [Sonnensheinโs emphasis] and therefore directly influenced by them.โ
Today Grayscaleโs argument becomes even stronger
According to Sonnenshein, the SEC even acknowledges the link in its approval of Teucrium and this makes Grayscale’s argument “even stronger.”
Therefore, 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 โ40 Act as being the differentiating factor.
— Sonnenshein (@Sonnenshein) April 7, 2022
Sonnensheinโs tweet threat was soon retweeted by Barry Silbert, CEO of Grayscaleโs parent company Digital Currency Group, saying the “sec delay” needed to be stopped. He added that:
โThe SEC is running out of excuses for not approving a spot based bitcoin ETF.โ
Since filing their application for a bitcoin spot ETF, Grayscale has set up a service aiding supporters to easily send emails to the SEC.
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Author 
Laszlo Dobos
Educated in computer engineering, Laszlo began developing an interest in crypto and blockchain technology back in 2013.
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