Osprey Funds Challenges Grayscale Ruling in Bitcoin ETF Lawsuit

The legal fight between Osprey Funds and grayscale Investment grayscale Investment - Investment platform is far from over. What started as a dispute over crypto advertising has turned into a high-stakes courtroom battle that could reshape the industry. Osprey is now urging a Connecticut judge to rethink his decision after initially siding with Grayscale in a lawsuit over unfair trading practices.

At the center of it all is a key question: Did Grayscale mislead investors by making them believe its Bitcoin Trust (GBTC) would definitely convert into an ETF? Osprey says yes – and that it lost business because of it. Grayscale, on the other hand, insists it played by the rules.

With millions on the line and the potential to set a major legal precedent, this case is one to watch.

Why is Osprey Upset?

Osprey argues that the judge made his decision too early – before reviewing all the evidence. The firm also believes the ruling unfairly expanded legal protections for Grayscale.

In January 2023, Osprey sued Grayscale and Delaware Trust Company, accusing them of falsely promoting GBTC as a guaranteed ETF conversion. Osprey claims this misleading marketing gave Grayscale an unfair edge in the market.

Osprey Pushes Back

Judge Mark Gould recently ruled in Grayscale’s favor, stating that Osprey’s claims were tied to securities transactions, which are exempt from the Connecticut Unfair Trade Practices Act (CUTPA). He also noted that at the time, Osprey and Grayscale were the only companies offering Bitcoin trust products with ticker-based exposure.

Osprey, however, wasn’t satisfied. On February 10, just days after the ruling, the company filed a motion asking the court to reconsider. It insists the case isn’t about securities but about deceptive advertising. Osprey claims Grayscale’s misleading promotions unfairly drew customers away, harming its business. The firm also argues that the ruling overlooked important legal differences between securities law and false advertising regulations.

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What’s Next?

Interestingly, a year after the initial lawsuit, the SEC finally approved Grayscale’s Bitcoin Trust to convert into an ETF after Grayscale won a separate court case. Osprey had even offered to settle its claims for nearly $2 million in July 2024, but Grayscale declined.

Now, Osprey is pushing ahead, framing the case as a fight for fair competition and honest advertising, not just securities law. Meanwhile, the firm is also working to convert its own Bitcoin Trust (OBTC) into an ETF after a failed acquisition deal with Bitwise.

The final outcome of this case could have a lasting impact on how crypto firms compete and market their products.