Investors Are “Suffering Harm” Due To SEC’s Surprise Pause On ETF Holding XRP And Solana, Asserts Grayscale

Asset management giant Grayscale is challenging the US Securities and Exchange Commission’s decision to pause the launch of its large-cap fund holding Bitcoin (BTC), Ethereum (ETH), Ripple’s XRP, Solana (SOL), and Cardano (ADA), proclaiming its investors are “suffering harm” due to the delay.

Grayscale Pushes Back On SEC Pause

Grayscale has filed a letter with the SEC in response to the agency’s unexpected pause on its plan to transform the Grayscale Digital Large Cap Fund (GDLC) into a spot ETF.

The GDLC primarily comprises Bitcoin, which accounts for 80% of its underlying assets. Another 11% of its holdings are in Ether, while Solana, XRP, and Cardano account for 2.8%, 4.8% and 0.8% of the fund, respectively.

In the letter, Grayscale’s legal team urged the Commission to follow rules enacted by Congress that create deadlines for the greenlighting of investment vehicles such as the GDLC.

The SEC had already approved the conversion on July 1 on an “accelerated basis”. However, a day later, the regulator issued a stay order to review the approval due to a pending internal review.

“Grayscale, the Exchange and the Fund’s current investors are suffering harm as a result of the delay in public launch of the Fund,” the company said.

Grayscale also claimed that the fund’s approval should stand by default as the SEC missed its legal deadline to act on the proposal, and that under federal law, the conversion of the fund should be considered automatically approved.

The asset manager’s lawyers are now contemplating filing a petition to force the regulator to allow its fund to begin trading as soon as possible. 

“Grayscale and the Exchange are therefore considering whether to file a petition requesting the Commission to lift the stay imposed by Rule 431(e) while the Commission reviews the action taken by delegated authority, so that the Fund may promptly launch while that review proceeds,” they postulated.

The move to convert GDLC into a spot fund is in line with Grayscale’s wider strategy to introduce more crypto products to mainstream financial markets, following the successful introduction of its spot BTC ETF in early 2024.

Meanwhile, asset managers have flooded the SEC’s desk with applications for ETF proposals tracking the prices of several cryptocurrencies, including meme coins like Dogecoin and Official Trump and other altcoins, amid a more lenient regulatory backdrop in the United States since crypto-friendly President Donald Trump returned to the White House in January.