SEC’s Delay of Grayscale’s Digital Large Cap ETF Approval Draws Legal Challenge
Attorneys for digital asset manager Grayscale challenged the U.S. Securities and Exchange Commission’s (SEC) decision to delay approval of its Digital Large Cap exchange-traded fund (ETF), following initial approval that was immediately put on review.
Grayscale’s legal team argued in a Tuesday letter that this abrupt reversal violates SEC rules by exceeding the statutory deadline for approval or disapproval mandated for rule proposals.
The letter stated,
“The consequences of a failure to meet the statutory approval or disapproval deadline, regardless of the reason, are clear: under Section 19(b)(2)(D), the rule proposal is deemed approved… Grayscale, the Exchange, and the Fund’s current investors are suffering harm as a result of the delay in the public launch of the Fund.”
Source: SEC
Industry Maturation Signal
Grayscale’s ongoing conversion of its crypto-based trusts into traditional ETF formats represents a significant signal of crypto industry maturation, bringing mainstream financial investors into the digital asset space.
Source: SEC
Related: Bitcoin investors have now splashed over $50B on US spot ETFs
SEC Considers ETF Approval Simplification
The SEC is exploring streamlined processes for certain crypto ETF approvals. This could potentially allow some applications to bypass traditional 19b-4 filings entirely, according to market reports.
SEC Chair Paul Atkins has publicly stated his office’s commitment to regulatory reform and innovation encouragement, emphasizing transparency and foundational rule support for market participants.
“My whole goal is to make things transparent from the regulatory aspect and give people a firm foundation upon which to innovate and come out with new products,” Atkins recently told CNBC.
If implemented, these streamlined processes could significantly increase the flow of new digital asset investment vehicles, potentially bringing blockchain-based ETFs, tokenized funds, and tokenized securities into the traditional financial system.
Industry analysts anticipate that simplified processes would provide greater investor access to the crypto markets, while potentially introducing additional capital inflows to digital assets overall.
