On the Pending GBTC Decision from the SEC

MS B&W.jpg
Michael Sonnenshein
Last Update 06/27/2022

Grayscale Investors,

We know you share our anticipation regarding the Securities and Exchange Commission’s (SEC) imminent decision about our application to uplist GBTC to an ETF. Securing this outcome has been and remains our team’s top priority. From its inception in 2013, GBTC was designed to be an ETF, and we have spent the better part of a decade working proactively with federal agencies to bring transparent, familiar digital currency investment vehicles to American investors. As we approach the end of our 240-day application review process, I wanted to take this opportunity to reflect upon all we have achieved together.

On November 2, 2021, as part of its application review process, the SEC published a notice to solicit comments on our proposal to uplist GBTC to a spot Bitcoin ETF. Soon thereafter, the Grayscale team developed and deployed a multifaceted strategy to raise awareness about the 19b-4 filing process, rally GBTC investors, educate the general public about the importance of this issue on a national level, cultivate critical relationships in Washington, D.C., and prepare for each possible outcome of the SEC’s decision.

    • We created a microsite with a corresponding QR code to serve as an educational resource about our efforts to uplist GBTC to an ETF and as an easy access point for individuals to make their voices heard. 
    • We then kicked-off a major campaign to drive people to the microsite—taking over billboards from D.C. to NYC, digital signage in airport lounges throughout the country, and print advertising in national newspapers, including The New York Times, The Wall Street Journal, and The Washington Post, to name a few. As Axios noted, Grayscale “papered over Washington, D.C.’s, Union Station with one message: ‘We care about crypto investors.'”
    • We also prioritized one-on-one meetings to build relationships with influential policymakers, decision makers, and thought leaders. We met with former regulators who provided insight regarding our engagement with the SEC. We maintained an open and active dialogue with the SEC, including in April 2022 when we met with the SEC again to address its concerns directly, discuss our operational readiness for GBTC as an ETF, and elevate the common themes that surfaced from the thousands of comment letters submitted. We met with nearly a dozen Democratic and Republican members of Congress and their offices, focusing specifically on members who serve on the Senate Banking Committee and House Financial Services Committee.
    • We partnered strategically with premier D.C. media outlets to host convenings around important topics related to crypto regulation, including sponsoring POLITICO’s Regulating the Digital Goldrush, The Washington Post’s The Evolution of Money: Cryptocurrency Regulation, and Axios’ Crypto & the Investing Space. At each of these events, we shared the stage with policymakers and regulators – including Senator Kirsten Gillibrand, Senator Cynthia Lummis, CFTC Commissioner Rostin Behnam, CFTC Commissioner Christy Goldsmith Romero, and Representative Darren Soto – and gathered hundreds of D.C. stakeholders, including reporters, administration officials, and members of Congress and their staffers. We also made our case to the media and key stakeholders at the recent World Economic Forum conference in Davos, Switzerland and Consensus 2022 in Austin, Texas, among many other virtual and in-person events.
    • On the media relations front, we met with more than 40 D.C.-focused reporters at top-tier outlets whose work is read daily by policymakers. We briefed reporters at The New York Times, Politico Axios Bloomberg Financial Times, CNBC and Reuters – just to name a few – to help them better understand the nuances of our efforts to uplist GBTC to an ETF and help ensure timely, accurate coverage of our efforts. Behind the scenes, we sent out weekly updates to more than 450 reporters to highlight key event appearances, media coverage, supportive comments from prominent figures, recent public polling, and other indicators of the increasing support for our campaign.
    • We reached out to meet with more than a dozen well-respected academics across the country, including researchers who are often called to testify before or consult with Congress. As Bloomberg reported, Vanderbilt University Professor Robert Whaley, who created the formula that calculates the CBOE Volatility Index (VIX), was one of a number of academics who submitted a comment letter to the SEC. Professor Whaley wrote: “Futures-based Bitcoin ETFs like BITO are a much more costly and inefficient way for investors to access Bitcoin compared to what would be a more transparent and well-designed spot-based Bitcoin ETP like GBTC.”
    • Last but not least, we met with nearly a dozen thought leaders in the crypto space, including researchers at well-respected think tanks such as the Brookings Institution and the Progressive Policy Institute, as well as premier advocacy groups such as the Blockchain Association and Chamber of Progress.

At each juncture, we sought to amplify your stories and your voices while advocating on behalf of your collective best interest: uplisting of GBTC to an ETF. Thanks in large part to your willingness to lend your voice to this cause, the campaign succeeded beyond our wildest dreams. Over 11,400 investors, academics, business leaders, trade associations, and other key stakeholders submitted comments to the SEC in support of Grayscale’s ETF proposal. As of June 9, 2022, 99.96 percent of those comment letters were supportive of Grayscale’s case. Notably, almost a third of unique letters asked the question: “if there are Bitcoin futures ETFs, why not a spot ETF?” – and hundreds of letters referenced other countries that have approved spot Bitcoin ETFs, underscoring that America is falling behind other countries in creating sensible crypto policy and regulation. Thank you to all who participated in this campaign. Your contributions have had a significant impact.

We remain encouraged by the SEC’s actions over the past eight months, which have signaled an increased recognition of and comfort with the maturity of the underlying Bitcoin market. The SEC first allowed trading to commence for Bitcoin futures ETFs in October 2021 under the 1940 Act. Then, in April 2022, the SEC approved a Bitcoin futures ETF registered under the 1933 Act, which is the same regulation GBTC would fall under. Most recently, another Bitcoin-linked investment product started trading: the first Short Bitcoin Futures ETF. The approval of each and every Bitcoin-linked investment product strengthens our arguments about why the U.S. market deserves a spot Bitcoin ETF.

But, as you know, the SEC continues to prohibit spot-based ETFs from coming to market, so the Grayscale team has been preparing for all possible post-ruling scenarios.

As the SEC decision draws near, I want to reinforce a few key points:

Most important, GBTC is operationally ready to uplist to an ETF the moment we are given the appropriate regulatory approvals. For this uplisting, we have selected best-in-class partners, including BNY Mellon and EY, among others.

We are also exploring options should the SEC not allow GBTC to uplist to an ETF. Our legal team, including in-house counsel and our attorneys at Davis Polk, have articulated thoughtful, comprehensive arguments in support of GBTC’s uplisting to an ETF. Most recently, we retained one of the country’s premier advocates, former U.S. Solicitor General Donald B. Verrilli, Jr., as a senior legal strategist. We have created the strongest possible legal team to help us articulate the importance of this issue.

As with most things in crypto, this experience has been memorable – to say the least. When we began having conversations in D.C. back in GBTC’s earliest days, we were meeting with folks who wanted to better understand the basics: “Who is Grayscale? What is Bitcoin?” Now, when we meet with folks in D.C., they ask us for an update on the number of comment letters that have been submitted (11,465!), how to think about the next Bitcoin halving, and topics like miner concentration, hashrate, and transactional throughput on the network. We have made so much progress, and we are only just beginning.

Grayscale is unequivocally committed to uplisting GBTC to an ETF. We have left no stone unturned. We have leveraged the full resources of the firm behind this effort and, in true Grayscale fashion, we will always operate in the best interests of our investors.

We anticipate a decision from the SEC by early July, and you’ll be hearing from the Grayscale team with more information as it becomes available. As always, we are deeply appreciative of your support as we fight to level the playing field for American investors.

To moving forward – together,

Michael Sonnenshein

Related content