Asset managers Osprey Funds and Grayscale Investments have agreed to resolve a lawsuit concerning alleged breaches of Connecticut law related to the marketing and promotion of Grayscale’s Bitcoin exchange-traded fund (ETF).
According to a court filing on April 9, the parties have reached a settlement in this two-year-old case and are in the process of finalizing the necessary documentation and terms. The filing indicated that once these steps are completed, Osprey will retract its appeal.
“Shortly after this appeal was initiated, the parties came to a settlement in this matter,” the motion stated. “It is anticipated that all tasks can be completed within 45 days, and it remains uncertain if a shorter extension would be adequate.”
The specifics of the settlement have not been disclosed.
Grayscale and Osprey reach an agreement
The legal dispute between the two companies began on January 30, 2023, when Osprey lodged a lawsuit in the Connecticut Superior Court. Osprey asserted that it was Grayscale’s sole competitor in the over-the-counter Bitcoin (BTC) trust market and accused Grayscale of using deceptive practices to sustain its market dominance.
Osprey alleged that Grayscale marketed its Grayscale Bitcoin Trust (GBTC) as a pathway to accessing a spot Bitcoin ETF through a conversion. Osprey contended that this conversion was implied to be guaranteed, despite existing regulatory ambiguities at the time.
The US Securities and Exchange Commission approved Grayscale’s request to change GBTC into a spot ETF in January 2024.
An August 2023 judgment mandated the SEC to reassess its previous rejection of Grayscale’s application to convert the fund into an ETF.
The SEC’s approval enabled GBTC to transform into a spot ETF and commence trading on the NYSE Arca exchange.
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Settlement follows Osprey’s appeal
On February 7, Judge Mark Gould ruled in favor of Grayscale, determining that Osprey’s allegations against the asset manager were exempt under the Connecticut Unfair Trade Practices Act.
In response, Osprey filed a motion for reargument on February 10. The fund argued that Gould’s ruling issued “before the close of discovery,” which is the formal phase for gathering evidence in a lawsuit.
The fund asserted that the ruling did not adequately account for the distinctions in how the Federal Trade Commission and Connecticut courts approach deceptive advertising.
This settlement concludes one of the more significant legal conflicts among crypto asset managers vying for early ETF market leadership. Grayscale’s GBTC continues to stand as one of the largest Bitcoin investment products in the United States.
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