In a recent X (formerly Twitter) exchange, Nate Geraci, President of the ETF Store and host of the ETF Prime podcast, and Scott Johnsson, finance lawyer at Davis Polk, dissected the potential for Grayscale to make a daring move regarding the uplisting of its spot Bitcoin ETF to the New York Stock Exchange (NYSE). Their conversation revolved around the possible advantages, risks, and implications of such a decision.
Can Grayscale Sidestep The SEC?
Geraci initiated the discussion by suggesting a daring strategy: “Interesting hypothetical play for Grayscale… Just go ahead & uplist GBTC to NYSE now. Make SEC force delisting & ask for forgiveness later (or just point to court victory). Obviously we need NYSE & market makers/APs to go along (probably the trickiest part), but what’s the risk at this point?”
Johnsson responded with skepticism about NYSE’s willingness to support Grayscale’s bold Bitcoin ETF move, pointing out the need for an effective registration statement for the ETF, which Grayscale currently lacks: “I had a similar thought and struggle to imagine NYSE Arca going along with this. Still need an effective registration statement as well for the ETF, which they don’t have.”
In defense of his stance, Geraci highlighted the SEC’s exceeded time frame, implying the ETF has been “deemed approved.” He questioned the risks involved and emphasized the possible rewards for the NYSE: “NYSE shows they go to bat for ETF issuers…They obviously want listings/volume. Volume they’d clearly get with the first mover GBTC ETF. Goodwill with prospective ETF issuers = priceless. Listings would increase IMO.”
Johnsson conceded to some of Geraci’s points but remained skeptical, stating: “I’ll buy that. Think SEC still has enough arrows in the quiver to tilt the calculus against such a move regardless of things like disclosure review.”
In a subsequent comment, Geraci emphasized the broader benefits the New York Stock Exchange could potentially reap by supporting Grayscale in this audacious move. He stated, “NYSE would gain a ton of credibility/new biz w/ ETF issuers tho IMO… Just don’t see SEC really questioning NYSE’s credibility at this point.”
By making this strategic move, the NYSE could fortify its position and reputation in the industry. Geraci believes that, ultimately, the decision would boil down to a cost/benefit analysis, adding, “I’m just saying that analysis has become much more compelling than some might be thinking.”
Spot Bitcoin ETF Already Approved?
In a separate thread on X, Johnsson delved deep into the ongoing saga between the SEC and Grayscale regarding the conversion of the GBTC into a spot Bitcoin ETF. Citing a recent interview with SEC chair Gensler, Johnsson speculated that Gensler is keeping a low profile on GBTC, as there is likely a battle going on behind the scenes over whether Grayscale will have to resubmit its application after the ruling.
He highlighted that the SEC issued a disapproval order on June 29, 2022, just a week before their final deadline. Yet, in a turn of events, the DC Circuit ruled the disapproval order unlawful on August 28, 2023. Johnsson outlined the complicated implications of this ruling: “So the tricky question is how does this order to vacate by the DC Circuit actually impact GBTC? Did the SEC satisfy the statute to issue a disapproval order even if it was later ruled unlawful and vacated?”
According to Johnsson, the key issue lies in statutory interpretation. Grayscale’s lawyers are presenting an argument that, if the SEC’s order is deemed void, then GBTC’s conversion is “deemed approved,” eliminating the need for any further action from Grayscale.
However, Johnsson stressed that while this “deemed approved” argument holds some weight, it is not a guaranteed victory. He stated, “Now while I think the ‘deemed approved’ argument is colorable, it’s certainly not a slam dunk.”
He suspects Grayscale is leveraging this position in its negotiations with the SEC, saying, “To be clear, I do not expect this argument to come into play other than as a point of leverage. It would likely require litigation to resolve that would take longer than simply refiling.”
At press time, Bitcoin traded at $28,319.
[UPDATE, October 19th, 13:49 UTC]: Grayscale filed form S-3 with the SEC as part of their efforts to convert GBTC to an spot ETF a few minutes ago. Nate Geraci commented, “Ha, Grayscale swatting down my idea… They gonna play by the rules.”