Grayscale legal challenge to SEC sparks response from the community

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

ThatsMRcurmudgeon2u, a Redditor who introduced himself as a securities lawyer also weighed in on the matter. According to the Reddit user, many anticipated the lawsuit as SEC chair Gary Gensler as they made it clear that they want exchanges to register with the SEC. The Redditor also accused the SEC of “holding GBTC hostage.”

Lawyer Jake Chervinsky tweeted that the ETF denial is "deeply disappointing," and it defies federal law and common sense. Chervinsky pointed out that the SEC's role should be protecting investors and argued that an ETF is a better product for investors.

According to Twitter user Ann, since the SEC approved an ETF that shorts Bitcoin, the SEC may be working to "suppress the price of Bitcoin." The Twitter user 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 Bitcoins to the 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.

— Vijay Boyapati (@real_vijay) June 30, 2022

In Reddit, user Percyheckendorf argued that the SEC's move to deny the ETF is bad for pensioners as pension funds will be "stuck buying equities" which does 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, the ETF was still not approved.