Grayscale Upbeat About Possible Win vs SEC

Grayscale Investments, manager of the $14 billion Bitcoin Trust, has been trying to convert it into an exchange-traded fund (ETF), most recently suing the Securities and Exchange Commission (SEC) for denying its application.

Photo Insert: Right now, the Grayscale product trades like a closed-end fund, at a discount to the underlying Bitcoin.

But questions from three appellate court judges on Tuesday seemed to hint that its quest could bear fruit.

Judges pressed the SEC on the distinction between the spot and futures markets and asked what data, exactly, the agency wanted Grayscale to show to prove that surveillance of the futures market was a sufficient proxy for surveilling that of spot Bitcoin, Joe Light and Liz Moyer reported for Barron’s Daily.

The SEC has said platforms on which Bitcoin and other tokens trade don’t have adequate fraud surveillance. But it has approved Bitcoin futures funds. Grayscale said there shouldn’t be a distinction because spot prices drive those of futures.

Tuesday’s case is about whether the SEC acted arbitrarily by denying applications for ETFs that hold Bitcoin directly. It has repeatedly denied those applications. Grayscale’s Bitcoin Trust stock jumped 13% after the oral arguments.

Right now, the Grayscale product trades like a closed-end fund, at a discount to the underlying Bitcoin. If it became an ETF, that discount would narrow and unlock about $5.9 billion in value for investors.

Other fund companies would also likely swarm into the market with their own applications.

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