Grayscale sues SEC after rejection of bid to turn the largest bitcoin fund into an ETF

The SEC on Wednesday rejected Grayscale’s application for a spot bitcoin ETF, citing a failure by the investment manager to answer questions about concerns around market manipulation.

Grayscale said it would file a lawsuit against the SEC after it turned down its bid to convert the investment vehicle into an exchange traded fund.

Grayscale's application was rejected by the SEC because the investment manager failed to answer questions about market manipulation.

The Grayscale proposal doesn't meet the concerns of the watchdog.

The ruling on the creation of the GBTC was delayed multiple times. Grayscale gave people a way to quickly email in their support for it.

Grayscale filed a petition with the U.S. Court of Appeals for District of Columbia Circuit after the SEC rejected their proposal. Donald B. Verrilli Jr., Grayscale's senior legal strategist, is leading the litigation.

The SEC is in violation of the Administrative Procedure Act and Securities Exchange Act of 1934 because it fails to apply consistent treatment to similar investment vehicles.

Outside of normal hours, the SEC was unavailable for comment.

Grayscale argues that the SEC's position is inconsistent in light of previous decisions to greenlight other bitcoin-based exchange traded funds, including those based on futures markets and one that allows investors to bet against thecryptocurrencies.

The SEC's approval of the first U.S. spotbitcoin exchange traded fund would potentially open the currency up to more institutional investors.

The move to deny Grayscale's application for an exchange traded fund adds to a lot of bad news. Three Arrows Capital ceased to exist.

The price of the virtual currency was down 1% in the last 24 hours. Since the peak of the bubble, Cryptocurrencies have lost $2 trillion.