The battle between Grayscale and the U.S. Securities and Exchange Commission (SEC) over spot Bitcoin ETF approval has become one of the most pivotal regulatory standoffs in the crypto industry. As momentum builds, Grayscale continues to press forward—not only through legal channels but also with strategic product development and public advocacy.
At the heart of this movement is a clear message: if the SEC has already approved Bitcoin futures ETFs, there is no consistent rationale for rejecting spot Bitcoin ETFs. Investors deserve fair access, regulatory consistency, and transparent oversight.
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The Origins of Grayscale’s Legal Battle with the SEC
In June 2023, the SEC rejected Grayscale Investments LLC’s proposal to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF). The commission claimed the application failed to meet requirements related to investor protection and prevention of market manipulation.
This decision sparked immediate backlash. Grayscale argued that the rejection was inconsistent with the SEC’s prior approval of Bitcoin futures-based ETFs—products that carry higher complexity and risk than spot ETFs. The company contended that treating similar financial instruments differently violated both the Administrative Procedure Act and the Securities Exchange Act of 1934.
Grayscale did not back down. Instead, it filed a lawsuit against the SEC in the U.S. Court of Appeals for the District of Columbia Circuit, challenging the agency's regulatory double standard.
Why Regulatory Consistency Matters
Craig Salm, General Counsel at Grayscale, emphasized in a public letter that regulators should not be in the business of "picking winners and losers." As a disclosure-driven regulator, the SEC’s role is to ensure transparency, fairness, and equal treatment across market participants.
Salm pointed out that approving futures-based ETFs while denying spot equivalents creates an uneven playing field. A spot Bitcoin ETF would offer direct exposure to Bitcoin’s market price, providing greater clarity and alignment with how traditional asset classes are structured.
Moreover, such an ETF would operate under strict surveillance-sharing agreements (SSAs) with regulated exchanges—mechanisms designed to detect and prevent manipulative trading activity. These safeguards, Salm argued, satisfy the SEC’s own standards for market integrity.
With nearly one million investors across all 50 U.S. states holding GBTC shares, converting the trust into an ETF could unlock billions in value and significantly reduce the current premium/discount volatility associated with its structure.
👉 See how institutional adoption is reshaping digital asset markets today.
Legal Momentum Builds: Court Hearings and Analyst Predictions
In early March 2025, oral arguments were held before the D.C. Circuit Court. Representing Grayscale was Donald Verrilli Jr., former U.S. Solicitor General, who made a compelling case: converting GBTC into a spot Bitcoin ETF would actually enhance investor protection by bringing the product under tighter regulatory oversight.
He argued that once structured as an ETF, GBTC would be subject to daily reporting, enhanced disclosure requirements, and real-time price transparency—all features absent in its current trust format.
Notably, judges expressed skepticism toward the SEC’s reasoning, questioning why a futures-based product deemed acceptable posed less risk than a spot version backed by actual Bitcoin holdings.
Following the hearing, Bloomberg senior ETF analyst Eric Balchunas raised his estimated probability of Grayscale prevailing in court to 70%, citing strong judicial pushback against the SEC’s inconsistent stance.
Michael Sonnenshein, CEO of Grayscale, projected that a final ruling would come by fall 2025—a decision he believes will set a precedent for future crypto asset approvals.
Contingency Planning: Tender Offers and Long-Term Commitment
While awaiting the court outcome, Grayscale has prepared contingency plans. In late 2023, Sonnenshein announced the possibility of launching a tender offer, allowing GBTC to repurchase up to 20% of its outstanding shares from investors.
This move would provide liquidity options even if ETF conversion remains blocked—but it requires both shareholder approval and regulatory exemptions from the SEC.
Importantly, Sonnenshein reaffirmed that Grayscale has no intention of dissolving GBTC. The company remains committed to operating the trust indefinitely until it achieves its goal: full conversion into a spot Bitcoin ETF.
This long-term strategy underscores Grayscale’s role not just as an asset manager, but as an advocate for broader market access and regulatory fairness in digital assets.
Expanding Horizons: New Fund Filings Signal Broader Ambitions
Beyond the GBTC conversion fight, Grayscale has taken steps to diversify its product pipeline. On May 9, 2025, the firm launched the Grayscale Funds Trust, a Delaware statutory trust established to manage new ETF offerings under the Investment Company Act of 1940.
Under this new structure, Grayscale filed three additional ETF applications with the SEC:
- Grayscale Global Bitcoin Composite ETF (BTC) – Designed to track a broad index of Bitcoin exposures.
- Grayscale Ethereum Futures ETF (ETHG) – Offering leveraged exposure to Ethereum futures contracts.
- Grayscale Privacy ETF (PRVC) – Focused on privacy-centric blockchain protocols and related digital assets.
These funds are expected to list on NYSE Arca, Inc., with Grayscale Advisors, LLC serving as investment advisor.
This expansion signals that Grayscale is preparing for a future where multiple crypto-based ETFs coexist—regardless of short-term regulatory hurdles.
Frequently Asked Questions (FAQ)
Q: What is the difference between a spot Bitcoin ETF and a futures-based Bitcoin ETF?
A: A spot Bitcoin ETF holds actual Bitcoin and tracks its real-time market price. In contrast, a futures-based ETF invests in Bitcoin futures contracts, which derive value from expected future prices. Spot ETFs offer more direct exposure and are generally preferred by long-term investors.
Q: Why hasn’t the SEC approved any spot Bitcoin ETFs yet?
A: The SEC has cited concerns about market manipulation and investor protection. However, critics argue these concerns are outdated, especially given global precedents and robust surveillance-sharing agreements now in place.
Q: How would converting GBTC into an ETF benefit investors?
A: Conversion would bring tighter regulatory oversight, lower fees over time, improved tax efficiency, and reduced premiums/discounts due to arbitrage mechanisms inherent in ETF structures.
Q: Is Grayscale guaranteed to win its lawsuit against the SEC?
A: Nothing is certain in litigation, but recent court sentiment and expert analysis suggest favorable odds—particularly given inconsistencies in the SEC’s treatment of similar products.
Q: Can I still invest in GBTC while waiting for ETF approval?
A: Yes, GBTC remains publicly traded. However, investors should be aware of its premium/discount fluctuations and higher expense ratio compared to typical ETFs.
Q: What happens if Grayscale loses the case?
A: Even in a loss, Grayscale may pursue further appeals or work with Congress to influence policy. The company has stated it will continue operating GBTC and advocating for fair access.
The path to a U.S.-listed spot Bitcoin ETF remains challenging—but Grayscale’s persistent legal strategy, combined with growing market demand and institutional support, makes approval increasingly likely.
As regulatory clarity inches closer, investors stand ready to embrace a new era of accessible, compliant crypto investing.
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