Pro-XRP Attorney Taps Grayscale To Win Case Against SEC

The courts have set a date for oral arguments in the case.

Attorney John E. Deaton has tapped Grayscale to win its case against the United States Securities and Exchange Commission (SEC).

The lawyer representing thousands of XRP holders in the SEC case against Ripple expressed this in a tweet today asserting that the regulator tends to lose when faced with resistance, citing facts shared by Ripple General Counsel Stuart Alderoty. 

Recall that, as reported, Alderoty had pointed out that the SEC has lost four out of its last five cases that have made it to the U.S. Supreme Court. 

In June, the agency denied Grayscale’s application to convert its Bitcoin Trust (GBTC) to a spot exchange-traded fund (ETF). The SEC in its decision, cited a lack of sufficient safeguards against market manipulation, among other concerns. As reported by The Crypto Basic, Grayscale opted to challenge this decision in the U.S. Court of Appeals for the District of Columbia.

Notably, Grayscale argues that the SEC unexplainably treated its spot ETF application differently from Bitcoin Futures applications it has approved in the past. Grayscale’s Senior Legal Strategist, Donald B. Verrilli Jr., a former U.S. solicitor general, asserted that it is a violation of both the Administrative Procedure Act and the Securities Exchange Act of 1934, under which Grayscale filed its application. 

“It’s just a classic case of taking like cases and treating them differently,” Verrilli said in a press briefing yesterday, per a CoinDesk report. Recall that CoinDesk is owned by Grayscale’s parent company Digital Currency Group (DCG).

In January, the court set March 7 for oral arguments in the case. The firm has urged investors to listen in, noting that it is the second of two cases that morning and could start as early as 10 a.m. ET.

One week from today, we make the case for why $GBTC should be allowed to convert to a spot #Bitcoin ETF in the D.C. Court of Appeals.
We're scheduled as the 2nd of 2 cases that morning, so exact timing may vary, but we could begin as early as 10:00 AM ET.https://t.co/NQQBmcvktx

— Grayscale (@Grayscale) February 28, 2023

The prevailing narrative is that a Bitcoin spot ETF would be a low-cost and familiar way for investors to gain Bitcoin exposure. However, it has faced resistance from the SEC despite approving products based on futures. Pundits speculate that the Gary Gensler-led SEC seeks greater oversight over the nascent market before it approves a Bitcoin spot ETF. 

YCharts data indicates that GBTC is trading at a 45.53% discount to Bitcoin’s market value. In a recent interview on Peter McCormack’s What Bitcoin Did podcast, Michael Sonnenshein, Grayscale’s chief executive officer, asserted that the conversion of the trust to a spot ETF would return billions to investors as the fund would move back up to its net asset value (NAV) due to an embedded arbitrage mechanism. 

Sonnenshein has disclosed that Grayscale is mulling a tender offer to redeem GBTC shares should legal efforts to overturn the SEC’s decision fail. 

It is worth noting that the financial health of DCG, Grayscale’s parent company, has come under increased scrutiny in recent months, sparking fears of a Grayscale liquidation.