Can They Bypass The SEC?

In a current X (previously Twitter) alternate, Nate Geraci, President of the ETF Retailer and host of the ETF Prime podcast, and Scott Johnsson, finance lawyer at Davis Polk, dissected the potential for Grayscale to make a daring transfer relating to the uplisting of its spot Bitcoin ETF to the New York Inventory Change (NYSE). Their dialog revolved across the potential benefits, dangers, and implications of such a choice.

Can Grayscale Sidestep The SEC?

Geraci initiated the dialogue by suggesting a daring technique: “Fascinating hypothetical play for Grayscale… Simply go forward & uplist GBTC to NYSE now. Make SEC power delisting & apologize later (or simply level to courtroom victory). Clearly we want NYSE & market makers/APs to go alongside (in all probability the trickiest half), however what’s the danger at this level?”

Johnsson responded with skepticism about NYSE’s willingness to assist Grayscale’s daring Bitcoin ETF transfer, mentioning the necessity for an efficient registration assertion for the ETF, which Grayscale presently lacks: “I had an analogous thought and wrestle to think about NYSE Arca going together with this. Nonetheless want an efficient registration assertion as properly for the ETF, which they don’t have.”

In protection of his stance, Geraci highlighted the SEC’s exceeded timeframe, implying the ETF has been “deemed accredited.” He questioned the dangers concerned and emphasised the potential rewards for the NYSE: “NYSE exhibits they go to bat for ETF issuers…They clearly need listings/quantity. Quantity they’d clearly get with the primary mover GBTC ETF. Goodwill with potential ETF issuers = priceless. Listings would enhance IMO.”

Johnsson conceded to a few of Geraci’s factors however remained skeptical, stating: “I’ll purchase that. Assume SEC nonetheless has sufficient arrows within the quiver to tilt the calculus in opposition to such a transfer no matter issues like disclosure evaluation.”

In a subsequent remark, Geraci emphasised the broader advantages the New York Inventory Change might probably reap by supporting Grayscale on this audacious transfer. He acknowledged, “NYSE would achieve a ton of credibility/new biz w/ ETF issuers tho IMO… Simply don’t see SEC actually questioning NYSE’s credibility at this level.”

By making this strategic transfer, the NYSE might fortify its place and status within the business. Geraci believes that, in the end, the choice would boil down to a price/profit evaluation, including, “I’m simply saying that evaluation has turn out to be far more compelling than some is perhaps pondering.”

Spot Bitcoin ETF Already Accepted?

In a separate thread on X, Johnsson delved deep into the continued saga between the SEC and Grayscale relating to the conversion of the GBTC right into a spot Bitcoin ETF. Citing a current interview with SEC chair Gensler, Johnsson speculated that Gensler is maintaining a low profile on GBTC, as there may be possible a battle happening behind the scenes over whether or not Grayscale should resubmit its utility after the ruling.

He highlighted that the SEC issued a disapproval order on June 29, 2022, only a week earlier than their ultimate deadline. But, in a flip of occasions, the DC Circuit dominated the disapproval order illegal on August 28, 2023. Johnsson outlined the difficult implications of this ruling: “So the difficult query is how does this order to vacate by the DC Circuit truly influence GBTC? Did the SEC fulfill the statute to challenge a disapproval order even when it was later dominated illegal and vacated?”

Based on Johnsson, the important thing challenge lies in statutory interpretation. Grayscale’s legal professionals are presenting an argument that, if the SEC’s order is deemed void, then GBTC’s conversion is “deemed accredited,” eliminating the necessity for any additional motion from Grayscale.

Nevertheless, Johnsson burdened that whereas this “deemed accredited” argument holds some weight, it isn’t a assured victory. He acknowledged, “Now whereas I believe the ‘deemed accredited’ argument is colorable, it’s definitely not a slam dunk.”

He suspects Grayscale is leveraging this place in its negotiations with the SEC, saying, “To be clear, I don’t anticipate this argument to return into play apart from as a degree of leverage. It could possible require litigation to resolve that will take longer than merely refiling.”

At press time, Bitcoin traded at $28,319.

Featured picture from Pymnts.com, chart from TradingView.com