Here’s Everything You Need to Know About the Latest Grayscale-SEC Developments

Andrew Throuvalas
3 min readMar 8, 2023


Michael Sonnhenshein defends Grayscale’s lawsuit against the SEC — and GBTC’s “exorbitant” fees.

After Grayscale presented its first oral arguments in its lawsuit with the Securities and Exchange Commission (SEC) on Tuesday, CEO Michael Sonnenshein walked away feeling “very encouraged.”

The executive spoke on Wednesday about the crux of Grayscale’s argument and why the SEC’s refusal to approve a Bitcoin spot ETF is “arbitrary and capricious.”

The Relationship Between Bitcoin Futures and Spot

During an interview with CNBC on Wednesday, Grayscale’s CEO echoed his company’s central case: the SEC continues to approve Bitcoin futures ETFs while denying Bitcoin spot ETFs.

After approving the first Bitcoin futures ETF in October 2021, the SEC has denied various spot ETF applications — including Grayscale’s — claiming an inability to detect fraud an manipulation in those markets.

Grayscale, meanwhile, has contended that a surveillance sharing agreement with the regulated CME Bitcoin Futures market should suffice — which boasts a 99.9% correlation rate with the Bitcoin spot price.

“We’ve been consistent throughout this process: the ETF application, the litigation, the oral arguments,” said Sonnenshein. “We’re hopeful that the court will be persuaded by those arguments.”

On Tuesday, the SEC argued before the appeals court that there wasn’t enough evidence that the futures market accurately reflected potential spot market manipulation — but the judges were skeptical of their claims. The market interpreted the hearing as a win for Grayscale, with GBTC — the firm’s gigantic Bitcoin Trust– pumping roughly 16% since it took place.

Sonnenshein has fought for years to convert that trust into a Bitcoin Spot ETF, which would allow GBTC shares to precisely track Bitcoin’s price. Some have claimed that more regulation of the crypto industry is needed before the transition can take place — but Sonnenshein rejected that premise:

“There is no new legislation required to bring GBTC further into the regulatory perimeter,” he told CNBC. “Bringing it to an ETF wrapper would further protect investors.”

The Alameda Lawsuit

While Grayscale launches its offensive against the SEC, the firm is being flanked with charges from Sam Bankman-Fried’s bankrupt crypto trading arm, Alameda Research.

In conjunction with the FTX Debtors, the firm demands that Grayscale make its GBTC shares redeemable for its underlying Bitcoin to help the bankrupt entity recover some of its lost assets within the fund. It also claimed that Grayscale violated its Trust agreements through “exorbitant” management fees, through which the fund has extracted over $1.3 billion.

Sonnenshein argued that the lawsuit was a “misguided complaint” and that GBTC’s high fees are due to the “constructs” around operating the investment vehicle, which are “different from equity-based products.”

“That’s the best long-term product structure, and ultimately the one that’s going to unlock the most value for investors, including folks like Alameda,” he said.

Originally published at on March 8, 2023.