In a recent filing in the Connecticut Appellate Court, asset managers Osprey Funds and Grayscale Investments confirmed that they have agreed to settle a two-year-old lawsuit over alleged violations of Connecticut advertising laws in promoting Grayscale’s Bitcoin ETF. The court document reveals that both parties are in the final stages of documenting the details of the settlement, and once completed—anticipated within the next 45 days—Osprey will withdraw its appeal.
Origins of the Legal Battle
The legal dispute began on January 30, 2023, when Osprey filed a suit in the Connecticut Superior Court asserting that Grayscale had unfairly maintained its market dominance by deceptively promoting its Grayscale Bitcoin Trust (GBTC) as a gateway to a spot Bitcoin ETF conversion. Osprey, which positions itself as Grayscale’s sole competitor in the over-the-counter Bitcoin trust market, claimed that the conversion process was presented as a certainty despite existing regulatory ambiguities.
Regulatory Hurdles and Milestones
Grayscale’s aggressive push to convert GBTC into a spot ETF met a significant milestone when the U.S. Securities and Exchange Commission approved the conversion application in January 2024. Earlier in August 2023, a court ruling even compelled the SEC to reexamine its initial rejection of Grayscale’s proposal, ultimately setting the stage for the trust’s transition into a fully traded spot ETF on the NYSE Arca exchange.
Court Rulings and Appeal Dynamics
A turning point in the case came on February 7 when Judge Mark Gould sided with Grayscale, ruling that Osprey’s claims fell outside the protection of the Connecticut Unfair Trade Practices Act. Osprey responded quickly by filing a motion for reargument on February 10, arguing that the ruling was premature because it was issued before the close of discovery and failed to account for differing interpretations of deceptive advertising by federal and state bodies.
A Landmark Settlement in the Crypto Arena
The settlement marks the resolution of one of the most prominent legal clashes among crypto asset managers vying for early dominance in the Bitcoin ETF space. While the precise terms remain confidential, the conclusion of this dispute has significant implications for the industry, especially as Grayscale’s GBTC continues to be one of the largest Bitcoin investment vehicles in the United States.
Emmanuel Ekokotu
