Here’s What Will Happen if Appeals Court Rejects Grayscale’s Bitcoin ETF Lawsuit Against SEC


Craig Salm, the chief legal officer at Grayscale Investments, the world’s largest digital asset management firm, has disclosed the company’s next move if it loses its case against the United States Securities and Exchange Commission (SEC) at the Court of Appeals. 

Grayscale Sues US SEC

Recall that in June, the asset management firm filed a review petition against the Commission for rejecting its proposal to convert its $40 billion flagship product, Grayscale Bitcoin Trust (GBTC), to a Bitcoin Spot Exchange-Traded Fund (ETF), filed in October 2021. 

The SEC stated that, after thorough scrutiny, the product does not fulfill consumers’ requirement expectations and other essential measures “designed to prevent fraudulent and manipulative acts and practices.”

However, Grayscale argues that the regulator’s approval of Bitcoin futures ETFs but not Bitcoin Spot ETFs is “arbitrary and capricious” and “unfair discrimination,” in violation of the Administrative Procedure Act (APA) and Securities Exchange Act of 1934 (“Exchange Act” or “’34 Act”).

But What Will Happen if Grayscale Loses its Lawsuit?

During an interview on Monday, Salm stated that Grayscale plans to continue fighting for a Bitcoin spot ETF if they lose to the SEC. He further noted that the firm has two options if the Appeals Court rejects its lawsuit.

“If Grayscale loses at the Appellate level, there are two options: we can seek an “en banc” hearing or appeal to the U.S. Supreme Court,” he said. 

The legal officer explained that in an en banc hearing, instead of allowing the three judges in the Appeals Court to make a decision regarding the company’s petition, the entire judges in the D.C. circuit will be tasked to make the final decision over the petition. He stated that an en banc hearing is rare and only happens when there is a split decision between the judges. 

Speaking on the second option, Salm noted that if either Grayscale or the SEC loses the case, either party could appeal to the Supreme Court. If the court decides to take on the subject, the company will follow the same litigation process it did in the appellate jurisdiction. 

Grayscale’s chief legal officer also disclosed that the final court hearing could be concluded within 12 months to two years of filing or even shorter; however, the firm believes its argument against the SEC’s decision is strong and is prepared to wait for the final decision. 

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