SEC rejects Grayscale's Bitcoin Spot ETF The Ecoinomic

Grayscale Investments' application to convert the $13.5 billion Grayscale Bitcoin Fund (GBTC) into a Bitcoin spot ETF was rejected by the SEC on Wednesday despite the company's broad effort to win approval (Grayscale is owned by Digital Currency Group, which is also the parent company of CoinDesk). As well as rejecting Bitwise's proposal to set up a Bitcoin spot ETF.
The SEC stated in its filing that the app failed to answer SEC questions about preventing market manipulation, as well as other concerns.

Like Bitwise, Grayscale originally filed last October but the decision was delayed several times due to the SEC's request for more information and comments from the public. The deadline for the SEC to make a decision on Grayscale's application is July 6.Supporters of approving the Bitcoin spot ETF have argued that the product will provide low cost and accessibility for individuals and entities investing in Bitcoin. And optimism about the approval began to grow after several Bitcoin Futures ETFs were approved last fall, and then two other FUTURES ETF approvals earlier this year based on the Securities Exchange Act of 1934.

Bitcoin Spot ETF

Grayscale, for his part, said he disagreed with the SEC's ruling. The reason is that while it has approved an ETF based on Bitcoin futures, the SEC still says no to bitcoin (spot) payment futures contracts. Grayscale argues that rejecting a spot product is inconsistent on the grounds that there are not enough safeguards against market manipulation, when approved products are priced based on that underlying market.

Some of their efforts have included urging members of the public to speak out against the SEC, a May meeting with the SEC and strengthening its legal team with the addition of Donald B. Verrilli Jr., who previously served as a general counsel in the Obama administration.

The rejection comes as a blow not only to Grayscale but also to the broader cryptocurrency industry after a long campaign in hopes of proving to the SEC that the product has enough measures to protect investors.
However, few analysts and observers anticipated approval, noting that SEC Chairman Gary Gensler had consistently wanted more oversight of cryptocurrency exchanges before approving the Bitcoin spot ETF.

Cryptocurrency investors and observers will now shift their focus to what Grayscale can and will do right now to win approval for the switch. Ceo Michael Sonnenshein said on June 27 that the company would be "prepared for all possible situations following the ruling." And that same day, Grayscale said it would work with market makers Jane Street and Virtu Financial to help convert GBTC into AN ETF if its application is approved.
GBTC was trading at a discount of about 29% of its net asset value prior to the rejection, down from 34% a week earlier.