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- Pepperdine University professor agrees that the Securities and Exchange Commission is “acting arbitrary and capricious.”
- The SEC said there are possible sources of fraud and price manipulation with the spot Bitcoin market.
- However, another publicly traded trust with a similar structure as GBTC got its approval some years ago.
Tom Lombardi, an adjunct professor of Digital Asset Finance at Pepperdine University, said he agrees with Grayscale CEO Michael Sonnenshein when he alleged that the Securities and Exchange Commission (SEC) was “acting arbitrary and capricious” while reacting to their rejection note.
Grayscale Bitcoin Trust recently got its application to convert to a Bitcoin exchange-traded fund (ETF) rejected by the SEC. Lombardi compared another publicly traded trust which has the SEC’s approval.
In his argument, the Aberdeen Standard Palladium ETF Trust (PALL) is similar to the Grayscale Bitcoin Trust (GBTC). The trust structure like GBTC hold’s a physically-backed commodity with a regulated futures market on CME Group but no regulated spot market.
The SEC noted in their disapproval notice that there are possible sources of fraud and price manipulation with the spot Bitcoin market and the “absence of surveillance sharing agreement with a regulated spot market.” Lombardi argued that there is no regulated spot market, and PALL has no surveillance sharing agreement either. In his words:
Bitcoin (BTC) and palladium have similar traits like high price volatility, with trading markets fragmented worldwide. Their market capitalization is respectively $366 and $336 billion. Likewise, their demand has outstripped new supply, pushing prices to shut up.
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