Attorneys for digital asset manager Grayscale pushed back against the US Securities and Exchange Commission’s (SEC) delay on approving its Digital Large Cap exchange-traded fund (ETF) in a letter sent on Tuesday.

The SEC’s Division of Trading and Markets initially approved the ETF proposal, but the SEC’s Office of the Secretary decided to review the action immediately afterward, halting the decision, Grayscale’s attorneys said.

This violates the “statutory approval or disapproval deadline” set by the SEC and conflicts with established procedure, according to the attorneys. The letter read:

“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 conversions of its crypto-based trusts, which were some of the earliest crypto investment vehicles, into ETFs signal the maturation of the crypto industry from a niche market into a mainstream asset class available to traditional financial investors.

SEC considers simplifying ETF approval process

Stock exchanges, fund managers and the SEC are exploring simplifying the ETF approval process for select crypto investment vehicles.

The expedited process would automate portions of the current application procedures, allowing certain ETF issuers to circumvent 19b-4 filings entirely, journalist Eleanor Terrett said in a post on X.

SEC Chair Paul Atkins recently reaffirmed the agency’s commitment to regulatory reform and ending regulation through enforcement to encourage innovation in the US.