GBTC - Grayscale CEO: SEC being 'arbitrary' and 'capricious' by denying spot Bitcoin ETFs

Grayscale Investments CEO Michael Sonnenshein argued that U.S. regulators were "discriminating" against his cryptocurrency investment firm by continuing to deny approval to exchange traded funds based on the spot price for Bitcoin ( BTC-USD ).

The comments followed news that Grayscale had filed suit against the U.S. Securities and Exchange Commission after the regulatory body denied the firm's application for a Bitcoin ETF.

"The SEC is acting arbitrary and capricious by continuing to approve Bitcoin futures ETFs while continuing to deny spot Bitcoin ETFs," Sonnenshein told CNBC.

The CEO of Grayscale, which operates the Grayscale Bitcoin Trust ( OTC:GBTC ), assured investors that the company was fully committed to pursuing its legal options to force an eventual SEC approval.

"We are not going to stop. We're going to put the full resources of the firm behind this lawsuit," he said.

Calling the SEC's decision "an unbelievably missed opportunity," Sonnenshein argued that approving a spot Bitcoin ETF would help build a safer regulatory framework around the cryptocurrency market, ultimately providing more protections for investors.

"A U.S. regulator is shunning the opportunity to bring this further into the regulatory perimeter and give investors more disclosure, more protections," he contended.

While Grayscale has long pursued approval for its Bitcoin ETF, the latest developments come at a sensitive time for the crypto market. Bitcoin ( BTC-USD ) has fallen precipitously in 2022, dropping from a 2021 high of nearly $69K to a level near $19K now.

Meanwhile, other cryptos have dropped dramatically as well. Ethereum ( ETH-USD ) has fallen from a high near $4,900 to a level just above $1,000 now. At the same time, names like Litecoin ( LTC-USD ) and Solana ( SOL-USD ) have shown similar declines, falling by nearly 67% and 82%, respectively, during 2022.

Even as the SEC rejects ETFs based on the spot price of Bitcoin ( BTC-USD ), there are funds that allow investors indirect access to moves in the cryptocurrency. Roundhill Investments recently filed for an ETF based on Bitcoin futures, part of a growing group of similar funds already on the market.

The list of these funds includes Proshares Bitcoin Strategy ETF ( BITO ), Valkyrie Bitcoin Strategy ETF ( BTF ) and the VanEck Bitcoin Strategy ETF ( XBTF ).

For more on the prospects for Bitcoin itself, read an upbeat take from Seeking Alpha contributor Victor Dergunov, who says "the next bull market is likely to start soon."

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