Grayscale’s legal challenge to SEC sparks response from the community

After Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a Bitcoin (BTC) exchange-traded fund (ETF) was denied, the firm launched a legal challenge against the United States Securities and Exchanges Commission. Following these events, the community responded with various reactions, from accusing the SEC of price manipulation to suggesting different solutions. 

Redditor u/ThatsMRcurmudgeon2u, who introduced themself as a securities lawyer, weighed in on the matter. According to the Redditor, many anticipated the lawsuit, as SEC Chair Gary Gensler has made it clear that he wants exchanges to register with the SEC. The Redditor also accused the SEC of “holding GBTC hostage.”

Lawyer Jake Chervinsky tweeted that the ETF denial was “deeply disappointing” and defies federal law and common sense. He pointed out that the SEC’s role should be to protect investors and argued that an ETF is a better product for them.

According to Twitter user Ann, given that the SEC approved an ETF that shorts Bitcoin, it may be working to “suppress the price of Bitcoin.” Ann argued that this is not the role of the SEC.

“On the other hand, Bitcoin advocate and author Vijay Boyapati suggested a different route. Boyapati said that a better move would be to “wind down the fund” and return the Bitcoin to investors. The author criticized Grayscale’s 2% fees and urged the firm to “do the right thing.”

A much better solution would be to wind down the fund and return the underlying #bitcoin to investors, who are currently being milked for an outrageous 2% per year. Do the right thing, Grayscale.

Redditor u/Percyheckendorf argued that the SEC's move to deny the ETF is bad for pensioners, as pension funds will be “stuck buying equities,” which do not have as much potential as Bitcoin.

Related: Elusive Bitcoin ETF: Hester Peirce criticizes lack of legal clarity for crypto

In a letter to investors on Monday, Grayscale announced that the SEC received 11,400 letters related to the proposed Bitcoin ETF. According to the firm, 99% of the letters were in support of the ETF. Despite these letters of support, it was still not approved.