- Osprey Funds and Grayscale Investments have agreed to settle their legal dispute over alleged advertising violations regarding Grayscale’s Bitcoin ETF.
- The lawsuit, filed in January 2023, claimed Grayscale misled investors by promoting GBTC as a certain path to a spot Bitcoin ETF despite regulatory uncertainty.
- The settlement comes after Grayscale successfully converted its GBTC to a spot Bitcoin ETF in January 2024 following SEC approval.
Asset managers Osprey Funds and Grayscale Investments have reached a settlement agreement in their two-year legal battle over alleged violations of Connecticut law in the advertising of Grayscale’s Bitcoin exchange-traded fund (ETF). According to an April 9 court filing, both parties are finalizing the settlement documentation and terms, after which Osprey will withdraw its appeal. The settlement details remain undisclosed.
The legal dispute began on January 30, 2023, when Osprey Funds filed a lawsuit in the Connecticut Superior Court. Osprey claimed to be Grayscale’s only competitor in the over-the-counter Bitcoin trust market and accused Grayscale of maintaining market dominance through deceptive practices. According to court documents, the parties expect to complete all settlement tasks within 45 days.
Origins of the Legal Dispute
At the heart of the lawsuit was Osprey’s allegation that Grayscale had falsely promoted its Grayscale Bitcoin Trust (GBTC) as a guaranteed pathway to a spot Bitcoin ETF through conversion. Osprey argued that Grayscale presented this conversion as certain despite significant regulatory uncertainty at that time.
The landscape changed in January 2024 when the US Securities and Exchange Commission (SEC) approved Grayscale’s application to convert GBTC into a spot Bitcoin ETF. This approval came after an August 2023 ruling that compelled the SEC to reconsider its previous rejection of Grayscale’s application, ultimately allowing GBTC to transition and begin trading on the NYSE Arca exchange.
Legal Proceedings and Settlement
Judge Mark Gould initially ruled in favor of Grayscale on February 7, determining that Osprey’s claims were exempt from the Connecticut Unfair Trade Practices Act. Osprey responded by filing a motion for reargument three days later, claiming that the ruling came prematurely "before the close of discovery" and overlooked differences in how federal and Connecticut courts handle deceptive advertising cases.
The settlement brings to a close one of the most notable legal confrontations among cryptocurrency asset managers competing for early dominance in the Bitcoin ETF market. Despite the legal challenges, Grayscale’s GBTC remains one of the largest Bitcoin investment vehicles in the United States.
This resolution comes during a period of ongoing market fluctuations, with recent reports indicating that crypto ETPs experienced outflows of $240 million in a single week amid concerns over US trade tariffs.
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