Grayscale Investments has formally challenged the U.S. Securities and Exchange Commission's stay order blocking the conversion of its $755 million Digital Large Cap Fund (GDLC) into an exchange-traded fund. The SEC initially approved the conversion but invoked Rule 431(e) on July 1, 2025, pausing implementation indefinitely for further review. Grayscale CEO Michael Sonnenshein contends the delay harms investors seeking regulated exposure to the fund's underlying assets: Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP (XRP), and Cardano (ADA).
The legal response, involving NYSE and NYSE Arca as listing partners, highlights ongoing regulatory friction in crypto markets. Immediate market reactions remained subdued, reflecting investor caution amid uncertainty. Historically, SEC decisions on crypto ETFs have significantly influenced asset prices—past spot Bitcoin and Ethereum ETF approvals triggered temporary price surges and institutional inflows. Approval could enhance market legitimacy and accessibility for both retail and institutional investors.
Grayscale's challenge underscores broader tensions in crypto regulation, with outcomes potentially setting precedents for future multi-asset ETFs. The SEC has not provided additional commentary beyond citing internal procedures for the stay.