As The SEC Starts Its Investigation, Grayscale Bitcoin Trust Rises

A lawsuit Grayscale Bitcoin Trust filed against the Securities and Exchange Commission hit the courthouse steps on Tuesday, and the shares of Grayscale Bitcoin Trust increased by 8.5% on the day.

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In June, the Grayscale bitcoin trust's managing director sued the Securities and Exchange Commission (SEC) after the agency rejected his application to convert the trust into a spot bitcoin ETF, a type of exchange-traded fund. Fraud and market manipulation are possible in spot bitcoin markets, according to the SEC.

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A Grayscale lawyer argued that the SEC acted arbitrarily by rejecting spot bitcoin ETF applications, whereas futures-based bitcoin ETF applications were approved, during oral arguments in the D.C. Circuit Court of Appeals, in which former U.S. Solicitor General Donald Verrilli Jr. represented Grayscale.

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Futures contracts for bitcoin are traded and regulated by the Commodities Futures Trading Commission (CFTC), which is the organization responsible for regulating futures contracts for bitcoin.

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Grayscale Bitcoin Trust has been trading at an increasingly wide discount to its net asset value (NAV) as of Monday, a one-month low, according to YCharts, since early 2021, when the trust started to trade at a significantly larger discount to the underlying value of bitcoin it holds.

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In an effort to narrow or close the spread over the bitcoin trust, Grayscale has been trying to convert it into an exchange-traded fund as part of its conversion efforts.

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There is no guarantee that a verdict will come before the end of the year, but Grayscale's spokeswoman said they expect a decision in the fall.