Grayscale Investments has launched a legal challenge against the United States Securities and Exchange Commission (SEC) after being denied its application to convert its Grayscale Bitcoin Trust (GBTC) into a spot-based Bitcoin (BTCexchange-traded fund (ETF).

On Wednesday, it announced that its senior legal strategist, former U.S. solicitor general Donald B. Verrilli Jr., had filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit.

Verrelli stated that the latest decision shows that the SEC is acting “arbitrarily and capriciously” by “failing to apply consistent treatment to similar investment vehicles” and will be pursuing a legal challenge based on the SEC’s alleged violation of the Administrative Procedure Act (APA) and Securities Exchange Act (SEA).

Grayscale Investments, which has $12.92 billion of assets under management in its GBTC, had been waiting on a decision from the SEC to convert its flagship Bitcoin trust into a spot-based ETF since filing its application to the regulator on October 19, 2021.

According to a filing from the securities regulator on Wednesday, the application was disapproved “to protect investors and the public interest” because the proposal failed to demonstrate how it is “designed to prevent fraudulent and manipulative acts and practices.”

The decision came out a full week before the July 6 deadline and came on the same day as a similar rejection of Bitwise’s Bitcoin exchange-traded product (ETP).

Michael Sonnenshein, Grayscale’s CEO, in a statement on Wednesday, said they were “deeply disappointed” and “vehemently disagree” with the SEC’s decision to deny their application.

“We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles,” he said. 

Addressing his 19,400 Twitter followers, James Seyffart, an ETF analyst at Bloomberg Intelligence, said that while the lawsuit has been filed, a court ruling on the matter is not expected until Q3 2023 to Q1 2024, meaning that we may not see the GBTC going forward any time soon.

Grayscale had been gearing up its legal team for a potential spat with the SEC. Earlier this month, the firm hired Donald B. Verrilli Jr., a former U.S. solicitor general, to join its legal lineup. 

Other attorneys in Grayscale’s legal line-up include attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm, who serves as chief legal officer.

Related: Grayscale reports 99% of SEC comment letters support spot Bitcoin ETF

In March, Grayscale CEO Michael Sonnenshein told Bloomberg that his firm would consider a lawsuit under the Administrative Procedure Act (APA) should the application for its Bitcoin Spot ETF be denied by the financial regulator.