Anthony Scaramucci’s crypto-focused investment firm SkyBridge Capital has voiced support for a wave of Bitcoin (BTC) spot ETF applications that hit the federal register last month, putting it in direct opposition to Grayscale.
The applications—from the likes of Ark Invest, Invesco, and BlackRock—identify Coinbase as a surveillance partner for detecting fraud in the underlying Bitcoin market. Unlike Grayscale, SkyBridge expressed confidence that Coinbase is well suited to the task.
“SkyBridge disagrees in the strongest terms with Grayscale’s assertion that the commission may hold up applications that meet the commission’s standards so that other market participants can catch up,” wrote lawyers representing the investment firm in a letter to the SEC on Monday.
Last month, Grayscale argued to the SEC that Coinbase would not an adequate partner for surveillance-sharing agreements to oversee Bitcoin, based on the regulator’s previous rulings on products with similar arrangements.
At the time, Grayscale cited the SEC’s rejection of GraniteShares ETP Trust in 2018, which intended to use Gemini as a surveillance partner. It also referenced the SEC’s rejection of Grayscale’s own attempts to use data sourced from multiple spot exchanges, including Coinbase, in previous applications.
Ultimately, Grayscale claimed that if the SEC were to change its mind about Coinbase now, it would need to let all ETF applicants–including Grayscale–be approved at the same time, so as not to “improperly grant an unfairly discriminatory and prejudicial first mover advantage to these proposals.”
In SkyBridge’s view, however, the U.S. Securities and Exchange Act of 1934 does not require the SEC to interfere with pre-established timelines for individual applications within the same market.
“The pending 19-b4 applications, if approved, would not discriminate between issuers–all issuers could revise their practices to comply with the rules, as amended,” wrote SkyBridge.
The investment firm added that the SEC has never overridden its standard timeline for approving 19-b4 applications to prevent a “theoretical first mover advantage.”
When the first wave of Bitcoin futures ETFs was approved in the United States, the ProShares Bitcoin Strategy ETF (BITO)–which was the first to be approved–absorbed the vast majority of market share. Spot ETF applicants are now racing for that same first-mover privilege, but none have yet found a way to appease the SEC’s market manipulation concerns.
Grayscale is one such party, as it is attempting to convert its Grayscale Bitcoin Trust (applicant) into a Bitcoin Spot ETF. Rather than re-filing with plans to partner with Coinbase, Grayscale has sued the SEC to forced the agency to approve its prior applications, which would use the CME Bitcoin Futures market to address fraud concerns.
“An executed surveillance sharing agreement with Coinbase, in Skybridge’s view, adequately addresses those concerns,” Skybridge’s letter concluded.
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