Osprey Funds is not backing down in its legal battle against Grayscale Investments. The firm has urged a Connecticut state court judge to reconsider a recent ruling that favored Grayscale in their ongoing dispute over alleged unfair trade practices related to the Bitcoin investment market.

Osprey’s latest legal maneuver seeks to revive its $2 million lawsuit, arguing that the judge’s decision was premature and misinterpreted key aspects of Connecticut’s consumer protection laws.

Osprey Challenges Court Ruling

On February 10, Osprey Funds filed a motion for reargument with Connecticut’s Superior Court, requesting Judge Mark Gould to review his February 7 ruling. The judge had sided with Grayscale, stating that the case revolved around securities transactions, which are exempt from the Connecticut Unfair Trade Practices Act (CUTPA). However, Osprey contends that the ruling was issued before the discovery process was complete and that it incorrectly broadened the scope of the CUTPA exemption.

The dispute began in January 2023 when Osprey sued Grayscale and Delaware Trust Company—the trustee of the Grayscale Bitcoin Trust (GBTC)—accusing them of misleading investors. Osprey argued that Grayscale falsely advertised its intention to convert GBTC into a spot Bitcoin ETF, presenting it as a certainty even though approval was never guaranteed. The lawsuit claimed this misrepresentation gave Grayscale an unfair advantage in the market.

Despite Osprey’s legal efforts, the Securities and Exchange Commission (SEC) ultimately approved GBTC’s conversion to an ETF in January 2024, following a separate court battle Grayscale won against the regulator. Meanwhile, Osprey attempted to settle its claims for just under $2 million in July 2024, but Grayscale did not accept the offer.

Legal and Market Implications

Osprey’s latest motion argues that Judge Gould’s ruling failed to distinguish between deceptive advertising and securities transactions. The firm maintains that its case is about unfair competition through misleading marketing tactics, not fraudulent securities dealings.

“The limited implied exemption from CUTPA for claims based on ‘securities transactions’ has never been applied as broadly as the Decision implicitly applied it here,” Osprey wrote in its motion.

The firm emphasized that it never engaged in any securities transactions with Grayscale directly and that its claims are about market competition rather than investment fraud.

This legal challenge comes at a crucial time for Osprey, which recently filed with the SEC to convert its own Osprey Bitcoin Trust (OBTC) into a spot Bitcoin ETF. The firm had initially planned to merge with rival asset manager Bitwise, but that deal ultimately collapsed.