To recap, an ETF is a financial instrument, which stands for “exchange-traded fund”. In this case, it refers to an asset that bundles together certain stocks of companies. An ETF can match the underlying price of an asset or be equal to the corresponding value index if there is more than one such asset at its core.


If you are unfamiliar with ETFs, how they work and other trivia, we recommend reading our educational article. In it, we've answered the most popular questions about the phenomenon.

The first Bitcoin ETF in the US was approved in October 2021 – an instrument from US exchange-traded instrument provider ProShares. However, this ETF was based on BTC futures rather than the normal market price of the first cryptocurrency or the so-called spot rate.

Since then, several such ETFs have been launched, but the spot instrument was never among them. This is not to the liking of cryptocurrency enthusiasts, because then the value of the asset is essentially not so much dependent on the price of Bitcoin, but rather on the activity of traders, who seem to be betting on the future of the cryptocurrency’s exchange rate.

However, there have been further attempts to approve a spot ETF. The most recent were the initiatives of the already mentioned Bitwise and Grayscale, which are highlighted in the table below.

List of deadlines for a Bitcoin ETF decision

But this time, the companies decided not to remain silent in response to the regulator’s activism and sued the regulator.

Why Bitcoin ETFs were banned

Grayscale is a large company that was founded in 2013 as a subsidiary of Barry Silbert’s Digital Currency Group. It offers clients market information, investment products and the ability to link to digital assets. According to the company, it now has the equivalent of $12.9 billion under management, making it one of the biggest players in the niche.

Grayscale’s initiative to convert its Bitcoin trust into an ETF was generally known as far back as April 2021, as management made no secret of its intentions. However, the regulator did not appreciate the idea – which is why the company was rejected tonight.


Note that the SEC responded to the ETF launch proposal ahead of the deadline. In Bitwise's case, the deadline for approval or rejection was the first of July, while the deadline for Grayscale was set for the sixth. In other words, the Commission clearly decided to show its attitude towards the market participants' initiative - for which it received a lawsuit.

As the agency noted, Grayscale’s Bitcoin spot ETF “does not do enough ‘to protect investors from fraudulent and manipulative activities and practices.

Grayscale chief executive Michael Sonnenschein’s response was swift. He announced the lawsuit against the SEC on his own Twitter.


We should note that such comments made by SEC officials sound extremely ridiculous given the current events in the stock market. To illustrate, here's a chart of Shopify stock price.

Over the past year, their price has fallen by 77 per cent. But then again, it’s the risks of “Bitcoin and other cryptocurrencies” that regulators are more likely to claim than anything else.

A graph of Shopify’s rate over the past year

And here’s a graph over five years. Obviously, the position of long-term investors is not to be envied here. By the way, BTC has risen in value much more in five years, and even taking into account the current collapse. However, the regulators are silent about that, too.

Shopify rate chart over five years

As a result, Grayscale will file a petition for review of this decision with the US Court of Appeals for the District of Columbia Circuit to challenge the refusal to turn Bitcoin Trust into a spot Bitcoin ETF. Here’s a comment from Grayscale representatives, which Decrypt cites.

We are deeply disappointed and strongly disagree with the decision of the US Securities and Exchange Commission, which continues to refuse to launch a spot Bitcoin-ETF to enter the US market.

As Sonnenschein noted, his company will continue to use all available resources to protect its investors and “fair regulatory conditions for Bitcoin investment vehicles”.

Grayscale announced its willingness to protect its interests back in early June. Here’s the relevant rejoinder from company representatives.

The US Securities and Exchange Commission does not take a consistent approach to similar investment instruments. With this in mind, the regulator is acting arbitrarily and arbitrarily in violation of the Administrative Procedures Act and the Securities Act of 1934.

US Securities and Exchange Commission


We believe Grayscale's actions have the potential to turn the market around in favour of the cryptocurrency industry. Obviously, if regulators get sued for every unjustified rejection of a certain investment instrument, they will eventually be more reticent on the topic. And the industry will get new options for communicating with digital assets.