Key Takeaways
- The decision by the SEC to forgo an appeal doesn’t guarantee automatic approval of Grayscale’s application.
- Reportedly, the appeals court is expected to issue a mandate detailing how its ruling should be executed by the SEC.
In a recent development, the U.S. Securities and Exchange Commission (SEC) has reportedly decided not to file a last-minute appeal against a recent court ruling in support of Grayscale Investments.
This ruling significantly increases the likelihood that Grayscale Investments, a prominent crypto asset manager, will be granted permission to launch a Bitcoin Exchange-Traded Fund (ETF).
The ruling, issued by the D.C. Circuit Court of Appeals, mandated that the SEC undertake a review of Grayscale Investments’ proposal to transform its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.
This decision seems to have solidified as the SEC, as reported by anonymous sources in both Reuters and Bloomberg, has opted not to challenge it.
It’s worth noting that this decision by the SEC to forgo an appeal doesn’t guarantee automatic approval of Grayscale’s application. Instead, it signifies a significant step in the process. The appeals court is expected to provide a directive outlining how the SEC should proceed in executing the ruling.
Analysts while suggesting that the SEC is unlikely to take the case to the Supreme Court, caution that this doesn’t automatically ensure Grayscale’s application’s approval. Instead, it paves the way for a dialogue between Grayscale and the SEC in the near future.
The specific steps and timeline for the approval or denial of Grayscale’s spot Bitcoin ETF application are anticipated to be revealed in the coming weeks, possibly within the next week or two.
Grayscale’s legal battle with the SEC commenced in June when the regulator rejected the firm’s request to convert its flagship Bitcoin fund, the Grayscale Bitcoin Trust, into a spot Bitcoin ETF.
Notably, the SEC has declined multiple applications for spot Bitcoin ETFs over the past decade, often citing concerns related to potential market manipulation.
Currently, several spot Bitcoin ETF applications are awaiting the SEC’s decision. Analysts have expressed varying degrees of optimism regarding the likelihood of approval, with some suggesting a 75% chance of approval in 2023 and others projecting a 90% chance of approval in January 2024 for specific applications, including one from Cathie Wood’s ARK Invest.
The backdrop for this legal battle traces back to an August ruling by a federal appeals court. The court found the SEC’s previous rejection of Grayscale’s application to be “arbitrary and capricious.”
The court’s reasoning was based on the SEC’s approval of Bitcoin futures ETFs for trading, making it challenging for the regulator to justify rejecting spot market products.
The court is now expected to engage with the SEC to revisit Grayscale’s application, and the SEC could still argue for rejection based on different grounds.
