Grayscale, the owner of the world’s largest Bitcoin fund, has grown even more frustrated with the US Securities and Exchange Commission (SEC) after the regulator approved a leveraged Bitcoin futures ETF last month. .

The firm has taken its complaint to court, arguing that the approval strengthens its case that the SEC’s denial of its Bitcoin spot ETF application is “discriminatory.”

2X Futures VS Spot: Which is riskier?

in a letter Before the DC Circuit Court of Appeals on Monday, Grayscale explained the risks involved with the Volatility Shares (BITX) 2x Bitcoin Strategy ETF, which the SEC allowed to go public on June 27.

The leverage product, which drew attention in the crypto industry weeks ago, seeks to double the performance of the S&P 500 CME Bitcoin Futures Daily Roll Index each day.

“As a result, it exposes investors to an even riskier investment product than traditional exchange-traded Bitcoin futures products, encompassing risks related to the bitcoin spot and futures markets,” Grayscale wrote.

Since October 2021, the SEC has approved a variety of Bitcoin futures ETFs for public trading, including a short-link ETF last year. At the time, Grayscale CEO Michael Sonnhenshein viewed the approval with optimism, believing the SEC was getting more comfortable with Bitcoin-related products across the board.

Days later, however, the agency denied Grayscale’s filing to convert Grayscale Bitcoin Trust (OTCMKTS: GBTC) into a spot ETF, arguing that Bitcoin’s underlying spot market contains market manipulation risks that could harm investors. .

However, according to Grayscale, the recently approved BITX is much riskier: the fund’s registration statement itself states that it “may only be suitable for informed investors” and that such investors could “potentially lose the full value of their investment in a only day.”

The case against the SEC

The registration statement noted that the ETF invests in CME Bitcoin futures contracts, the value of which “depends on or is derived from the underlying reference asset,” ie. “bitcoins”.

One of Grayscale’s main legal arguments against the SEC is that CME Bitcoin Futures, the exchange with which it intends to form a surveillance sharing arrangement (SSA) for its spot Bitcoin ETF, is directly tied to the spot Bitcoin market.

While the SEC has argued otherwise, the judges overseeing the case were more sympathetic to Grayscale’s arguments during oral arguments in March.

“The only way to eliminate the SEC’s lopsided treatment of bitcoin-based ETPs is to allow proposed Bitcoin ETPs like Grayscale’s to start trading,” the company concluded.

Bitcoin surged last month after asset management giant BlackRock filed for a Bitcoin spot ETF, fueling optimism that it could be the first to please the SEC. Unlike Grayscale, the company has confirmed that it will form an SSA with Bitcoin spot exchange Coinbase.

Uncertainty surrounding BlackRock’s filing still looms large, however: trade litigator Joe Carlasare told CryptoPotato this month that Coinbase may not be considered suitable by the SEC for detecting market manipulation, as it only understands ~2%. of global Bitcoin trading volume.

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This post Grayscale Calls Out SEC For Approving Leveraged Bitcoin Futures ETF While Denying Spot

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