Here is the crux of their argument (informally, I'd be interesting to see how they actually frame it in the suit):

> As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934,” added Donald B. Verrilli, Jr., Grayscale Senior Legal Strategist and former U.S. Solicitor General. “There is a compelling, common-sense argument here, and we look forward to resolving this matter productively and expeditiously."

Given that the SEC has approved no other spot ETFs for BTC, I don't know how they can make the argument that the SEC has "failed to apply consistent treatment."

Unless they're claiming that spot ETFs for BTC as a whole should be treated identically to other spot ETFs, which feels inconsistent with their larger argument for approval (that the Bitcoin market needs to be brought into the regulatory fold, implying that it's currently amenable to manipulation.)

I'm way out of my depth here and only speaking based on what I've seen people talking about online, but my understanding is that:

There are multiple types of securities offerings. The sec has historically denied the 1934 act etf's for bitcoin (spot or futures based) claiming they weren't comfortable with the guarantees it offers.. This is what Grayscale is based on. The original future's based etf that they accepted was based on the 1940's act which the sec explicitly said they preferred. Earlier this year the sec approved a 1934 futures based bitcoin etf. My understanding is that one of Grayscale's arguments is that it is unfair and arbitrary to deny their 1934 based etf when they just accepted separate one a few months ago and that clearly their concerns relating to the 1934 based offerings no longer exist.

You can buy ETFs for all sorts of commodities, currencies and securities. No matter which umbrella bitcoin falls under, there are numerous etfs that can be be compared, right? Why is bitcoin or crypto special here? Is it the SECs job to make judgements on the assets that want to be included in the exchange?

Spot commodity linked ETNs have well regulated custodians physically holding assets in vaults. SEC probably has concerns about Grayscales ability to securely hold custody of bitcoin. Given "All my apes gone" and other recent debacles, this isn't too surprising.

> Is it the SECs job to make judgements on the assets that want to be included in the exchange?

Yes, and that is the crux of the argument: the Exchange Act requires the SEC to evaluate ETPs for the possibility of "fraudulent and manipulative acts and practices." In other words: the SEC lacks confidence that approving a spot ETF for Bitcoin would not further advance manipulation and/or fraudulent behavior in the Bitcoin market.

There is no moral judgment here. "Fraudulent and manipulative acts and practices" is the language of systemic and individual risk, not a moral statement.

(You will note that the SEC is more than happy to allow ETFs that specialize in petrochemicals or defense contractors; there is no evidence whatsoever that this was a morally driven decision.)

They've repeatedly set out the problems with the bitcoin market that make it unsuitable for an ETF, responding to ETF applications over the past two years.

Every new ETF application has just blithely ignored the previous reasons for refusal, and Grayscale ignored them too.

At this point, the blockchain industry is just playing dumb and pretending not to understand.