<\/p>\n
A final order by the DC Circuit Court of Appeals in Grayscale Investments\u2019 win over the US Securities and Exchange Commission could offer some clarity for those awaiting spot bitcoin ETFs.<\/p>\n
Or not.<\/p>\n
Language by the judges will matter, one lawyer noted, as the court might limit how the SEC can deny the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF \u2014 should it choose to \u2014 going forward.<\/p>\n
Though the SEC decided not to challenge a court ruling<\/a> that undermined its method to block GBTC\u2019s proposed conversion, many still expect it could take weeks or months before bitcoin ETFs hit the market.\u00a0<\/p>\n The SEC\u2019s<\/a> chance to request a rehearing passed on Oct. 13. The DC Circuit Court of Appeals is now set to issue a \u201cfinal mandate\u201d within seven days of that date, a Grayscale spokesperson said in a statement.<\/p>\n The court may extend its time to issue a mandate, according to federal rules of appellate procedure<\/a>. Because the SEC\u2019s window to request a re-hearing expired late last Friday, the court\u2019s order might not be published until Monday, a source familiar with the matter told Blockworks.\u00a0\u00a0\u00a0\u00a0<\/p>\n \u201cThe Grayscale team remains operationally ready to convert GBTC<\/a> to an ETF upon the SEC\u2019s approval, and we look forward to sharing more information as soon as practicable,\u201d a firm representative said.<\/p>\n As Grayscale<\/a> \u2014 and the industry \u2014 await the court\u2019s final mandate, one thing appears clear: The court will order the SEC to reconsider its decision to deny GBTC\u2019s conversion to an ETF, according to Arie Heijkoop, partner at law firm Haynes Boone.<\/p>\n Still, details and scope of the court\u2019s order \u2014 as well as the SEC\u2019s upcoming move in response \u2014 remain unclear.\u00a0<\/p>\n The SEC has declined to comment on the suit.\u00a0<\/p>\n \u201cI expect the court\u2019s order will not go so far as to require the SEC to approve the application, because the court probably wants to preserve some deference in case the SEC finds other grounds on which to deny the application that it would consider valid,\u201d Heijkoop told Blockworks.\u00a0\u00a0\u00a0<\/p>\n The regulator has not raised other significant concerns \u2014 such as custody issues \u2014 in previous spot bitcoin ETF<\/a> denials or in its responses to Grayscale\u2019s legal filings, the law partner added.<\/p>\n \u201cSo if it denies the GBTC application again on new grounds, that may be viewed skeptically by applicants and possibly a future court,\u201d Heijkoop said. \u201cIt will be interesting to see if the court will use language in the order that effectively would limit how the SEC may continue to deny the application, such as stating explicitly that any such grounds have to be based on factors that do not apply to bitcoin futures.\u201d<\/p>\n DC Circuit Court of Appeals judges said in an August ruling<\/a> that the SEC allowing bitcoin futures ETFs, but blocking GBTC\u2019s conversion to an ETF \u201cwas arbitrary and capricious.\u201d<\/p>\n Grayscale on Thursday filed with the SEC a Form S-3 as part of continued efforts to convert GBTC to an ETF. A person familiar with the matter called the filing \u201cmore of a procedural milestone\u201d<\/a> for the firm to start conversations with another SEC division as the lawsuit concludes.<\/p>\n NYSE Arca, the exchange that would list the GBTC ETF, has not yet refiled a 19b-4<\/a> for this proposed product. Grayscale acknowledged Thursday that the SEC\u2019s approval of a 19b-4 would be needed for the GBTC conversion.<\/p>\n In an X thread on Wednesday, Scott Johnsson, an associate at Davis Polk & Wardwell, pondered whether there would be a need to submit a new 19b-4. He noted that a 19b-4 is deemed approved if the SEC does not issue an order on it. Moreover, he pointed out that the Court of Appeals was set to vacate the SEC\u2019s disapproval.<\/p>\n Grayscale could use that point as leverage in talks with the SEC, which will probably request for the firm to refile a 19b-4, Johnsson said.<\/p>\n \u201cI don\u2019t expect the mandate issued on Friday by the DC Circuit Court will provide much clarity,\u201d he wrote in an X post. \u201cBut it should be interesting to see if GBTC refiles and when. I do think refiling likely ends up being the path of least resistance.\u201d<\/p>\n SEC Chair Gary Gensler<\/a> declined to comment on the regulator\u2019s decision not to appeal the Grayscale court win in a Wednesday interview<\/a> with Bloomberg TV.<\/p>\n He acknowledged that there are nearly a dozen spot bitcoin ETF filings that its staff is actively reviewing. The SEC\u2019s disclosure review team gives feedback to potential issuers, Gensler added, declining to comment on such conversations.\u00a0<\/p>\n Indeed, issuers have updated bitcoin ETF filings with additional information in recent days \u2014 a potential sign of productive dialogue between the firms and regulators, executives and segment observers have said.<\/p>\n Read more:<\/strong> Another would-be bitcoin ETF player: \u2018It\u2019s going to get approved\u2019<\/a><\/p>\n \u201cIt now seems more likely that the SEC has shifted gears and, rather than work to articulate new reasons for denying a spot bitcoin ETF, it is looking at the imminent approval of this application and, if so, likely the numerous other spot bitcoin ETF applications,\u201d Heijkoop said.<\/p>\n The SEC\u2019s deadline to decide on a spot bitcoin ETF by Ark Invest and 21Shares<\/a> is Jan. 10. The regulator has until mid-March to decide on a bundle of other such proposals, including ones by BlackRock and Fidelity.\u00a0<\/p>\n Heijkoop said it seems \u201csignificant\u201d that the SEC\u2019s approval of ether futures ETFs<\/a> came after the August court ruling, which called out the disparate treatment of spot and futures products as problematic.\u00a0<\/p>\n \u201cIt would indicate the SEC approved the ether futures ETF applications knowing that it would then be scrutinized if it refused ETF applications for products that traded in the spot market,\u201d he explained.\u00a0<\/p>\n The SEC allowed six ether futures ETFs by ProShares, VanEck and Bitwise to launch on the same day. This signals the regulator would likely look to permit a bunch of bitcoin ETFs, if greenlit, to start trading together, Heijkoop said.<\/p>\n He added: \u201cI expect the SEC to grant approval to spot bitcoin applications, which may include Grayscale, possibly as early as the end of this year but more likely in early- to mid-2024.\u201d<\/p>\n Don\u2019t miss the next big story \u2013 join our\u00a0free daily newsletter<\/a>.<\/strong><\/p>\nFinal ruling and what it could mean<\/h2>\n
Beyond GBTC<\/h2>\n
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