Grayscale Fights SEC Delay on Large-Cap Crypto Fund
Grayscale Investments is challenging the SEC's decision to delay the approval of its Grayscale Digital Large Cap Fund LLC (GDLC) for listing and trading on NYSE Arca. This fund offers exposure to major cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), XRP, Solana, and Cardano (ADA).
SEC Approval and Subsequent Delay
The SEC's Division of Trading and Markets initially approved the GDLC on July 1st. However, the Commission swiftly issued a stay, citing a pending internal review. This unexpected action has prompted Grayscale to take legal action.
Grayscale's Legal Argument
In a letter to the SEC, Grayscale's legal team argued that the SEC missed its legal deadline to act on the proposal. They contend that under federal law, this inaction constitutes automatic approval. Their argument emphasizes that the SEC cannot utilize internal processes to bypass the legally mandated deadline established by Congress.
“The Commission’s internal housekeeping rules cannot be used to skirt an act of Congress,” Grayscale’s legal representatives stated.
Grayscale further highlighted that the delay is causing significant harm to GDLC investors. They are urging the SEC to recognize that the approval became legally final. While pursuing this legal challenge, Grayscale remains open to cooperation with the SEC and notes the agency's recent positive steps, such as establishing a Crypto Task Force.
Expert Opinion: Procedural Hiccup or Major Setback?
Scott Johnsson, General Partner at VB Capital, suggests the delay may stem from a procedural issue rather than fundamental problems with Grayscale's application. He speculates that a last-minute objection, potentially from a commissioner known for their crypto skepticism, may have triggered the SEC's action.
Johnsson remains optimistic that the fund will launch soon, emphasizing that the pause might just be a temporary setback.
This is why (sometimes) lawyers are worth it. Given Grayscale was suggesting they had productive talks with the SEC prior to approval... my guess is the Rule 431 delay is a procedural hiccup.
Codeum provides comprehensive blockchain security solutions, including smart contract audits, KYC verification, and custom smart contract and DApp development. We help projects navigate the complexities of tokenomics and regulatory compliance, working with launchpads and crypto agencies to ensure a secure and successful launch. Contact us today to learn more about how we can assist your project.