A federal court’s decision overturns the SEC’s block on Grayscale’s spot Bitcoin ETF, allowing its launch as the first of its kind.
Grayscale Investments has secured approval from a federal court to introduce the United States’ inaugural Bitcoin exchange-traded fund (ETF).
This landmark decision arrives following a legal dispute between Grayscale and the US Securities and Exchange Commission (SEC) regarding the transformation of the Grayscale Bitcoin Trust into an ETF.
On August 29, the District of Columbia Court of Appeals ruled in favor of Grayscale, overturning the SEC’s initial rejection of the ETF application. This green light clears the path for the first-ever spot BTC ETF.
This development carries profound implications, potentially enabling the cryptocurrency sector to attract substantial investments from everyday individuals. Moreover, it might catalyze the submission of further Bitcoin ETF proposals from other firms.
Presently, the SEC holds a 45-day window to contest the ruling. Should an appeal materialize, the case could either be escalated to the US Supreme Court or undergo a panel review.
The SEC’s Initial Denial:
In the preceding year, the SEC declined Grayscale’s request to transform their Grayscale Bitcoin Trust into an ETF.
Conversely, the commission did approve the application for a Bitcoin futures ETF, a fund that mirrors agreements to purchase or sell the cryptocurrency at a prearranged price.
During 2022, other entities also sought spot Bitcoin ETFs, all of which were ultimately denied by the SEC on grounds of investor protection. Noteworthy asset management firms that pursued Bitcoin ETFs included Fidelity, Cathie Wood’s ARK, and Invesco.
However, Grayscale diverged by filing a lawsuit against the SEC to challenge the denial of its application. Because the SEC functions as a regulatory body, the case was expedited to the appeals court, where it has now been overturned.
Future Trajectory of the Grayscale ETF:
Going forward, both Grayscale and the SEC possess the opportunity to contest this recent court verdict within a 45-day timeframe. If an appeal is pursued, the case could escalate to the US Supreme Court or undergo a review by an en banc panel.
The SEC’s response and potential appeal remain uncertain.
Should the SEC opt against appealing, the court would specify the particulars of implementing its judgment. This could involve instructing the SEC to endorse the ETF application or revisiting Grayscale’s proposal. In the latter scenario, the SEC might still dismiss the application based on alternative grounds.
Repercussions for Other ETF Applications:
In this year alone, multiple firms have submitted spot Bitcoin ETF applications with aspirations for listing on Nasdaq and CBOE Global Markets. Prominent applicants encompass BlackRock, Fidelity, WisdomTree, VanEck, Bitwise, and Invesco.
Several of these entities have indicated partnerships with Coinbase, the leading US-based cryptocurrency exchange, to oversee trading activities within the underlying Bitcoin market. While the SEC has officially acknowledged these submissions, it operates within a decision timeline of up to 240 days.
The possible interference posed by the SEC’s recent lawsuit against Coinbase for unregistered exchange activities remains unclear.
Though the implications of Grayscale’s triumph for these applications are uncertain, it could potentially influence the SEC’s determinations concerning these proposals. This judgment might serve as a precedent or reference point for other crypto-related ETF applications.
Bitcoin Surges Post Grayscale Ruling:
Following this announcement, BTC’s price has surged. As of August 29, Bitcoin has risen by 5% over the past 24 hours.
This marks a substantial turnaround in its price trajectory, reversing the downward trend witnessed in the past two weeks.
The primary cryptocurrency experienced a two-month low on August 18, when BTC declined by 7.2% to $26,172—its most significant single-day drop since the FTX collapse in November 2022.
At the time of composing, Bitcoin was trading at $27,417, reflecting a 5.6% increase over the previous seven days.
