Thomas Daniels
In a sharply worded letter dispatched on Tuesday, Grayscale’s legal team accused the U.S. Securities and Exchange Commission of violating federal statutes by stalling its Digital Large‑Cap exchange‑traded fund (ETF) approval process. Attorneys assert that the SEC’s decision to postpone its ruling undermines the agency’s statutory deadline and established procedural norms.
Despite initial approval of the ETF proposal by the SEC’s Division of Trading and Markets, the Office of the Secretary intervened, initiating an immediate review that effectively froze the decision. Grayscale contends this move contravenes Section 19(b)(2)(D), which mandates that a failure to approve or disapprove by a fixed deadline results in automatic approval of the filing.
“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.”
Grayscale’s transition from crypto trusts to ETFs reflects the maturation of digital assets from niche vehicles to recognized mainstream financial products. The firm contends that delays not only hamper investor access but also stifle market evolution.
SEC Eyes Streamlined Crypto ETF Approval
Across the industry, exchanges, fund managers, and the SEC are exploring reforms to streamline ETF approval workflows. Proposed measures include automating components of 19b‑4 filings and potentially bypassing them entirely for qualifying digital asset products, according to financial journalist Eleanor Terrett.
SEC Chair Paul Atkins, in a recent interview with CNBC, underscored the agency’s pivot toward transparency and innovation. “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,” he stated.
Should these reforms materialize, they could pave the way for a surge of new digital‑asset products—ranging from altcoin ETFs to tokenized funds and equity—and significantly expand institutional participation in crypto markets. The increased capital inflows may, in turn, drive broader asset price appreciation.
