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The DC Circuit Court of Appeals has formalized Grayscale Investments\u2019 court win over the US Securities and Exchange Commission \u2014 sending the onus back to the regulator.<\/p>\n
A three-judge panel ruled unanimously in August that the SEC rejecting Grayscale\u2019s proposal to convert its bitcoin trust (GBTC) to an ETF \u2014 but allowing bitcoin futures funds to launch \u2014 was \u201carbitrary and capricious.\u201d<\/p>\n
The court said at the time that the commission\u2019s order denying the GBTC conversion would be \u201cvacated.\u201d The final mandate affirming its decision \u2014 filed Monday \u2014 comes 10 days after the SEC\u2019s 45-day window to appeal the court loss to Grayscale expired<\/a>.\u00a0<\/p>\n \u201cThe Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF,\u201d a Grayscale spokesperson told Blockworks Monday. \u201cGBTC<\/a> is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors.\u201d<\/p>\n As some expected, the mandate did not offer clarity on next steps.\u00a0<\/p>\n Bloomberg Intelligence analyst James Seyffart noted in an X post<\/a> last week: \u201cIt\u2019s not gonna be some massive market moving document dictating what the SEC has to do. It\u2019s procedural.\u201d<\/p>\n Read more:<\/strong> What the judges said: unpacking the Grayscale court ruling<\/a><\/p>\n Still, Nate Geraci, president of The ETF Store, said in a Sunday X post<\/a> that the formalized ruling would be another step towards spot bitcoin ETF approval. The first proposal for such a product came in 2013.\u00a0<\/p>\n \u201cSay what you will about Grayscale, but their legal efforts have paved way for every issuer,\u201d Geraci wrote.<\/p>\n Optimism from a number of industry executives and segment observers around the potential approval of a spot bitcoin ETF in the coming months has grown.\u00a0<\/p>\n Bitcoin\u2019s (BTC<\/a>) price eclipsed $31,000 Monday \u2014 up about 10% in the last week \u2014 due in part to such a change in sentiment<\/a>, according to analysts.\u00a0<\/p>\n Read more: <\/strong>Another would-be bitcoin ETF player: \u2018It\u2019s going to get approved\u2019<\/a><\/p>\n While the court mandate Monday finalized Grayscale\u2019s court win, some have pointed out the regulator could still deny GBTC\u2019s conversion on different grounds.\u00a0<\/p>\n The SEC could still ask the US Supreme Court to review the Court of Appeals ruling, Bloomberg Intelligence senior litigation analyst Elliott Stein said in an interview<\/a> last week. But that route is unlikely, he added.\u00a0<\/p>\n \u201cSo it\u2019s really back in the SEC\u2019s<\/a> court, so to speak,\u201d Stein said. \u201cAnd it\u2019s going to be a discussion now, I think, between the SEC and Grayscale as to what the process is next.\u201d<\/p>\n Grayscale filed on Oct. 19 to register shares of GBTC under the Securities Act of 1933 via an S-3 form \u2014 marking another step in the process<\/a> to ultimately turn the trust into an ETF.<\/p>\n An SEC spokesperson has declined to comment on this issue.\u00a0<\/p>\n SEC Commissioner Hester Peirce said in an interview<\/a> with CNBC Monday she has believed the regulator should approve a spot bitcoin ETF for five years.\u00a0<\/p>\n \u201cThe logic for why we haven\u2019t [approved one] has always mystified me,\u201d she added. \u201cThe court case, obviously, is an important factor in the landscape, but I can\u2019t guess as to my colleagues\u2019 approach to this topic.\u201d\u00a0<\/p>\n The SEC allowed bitcoin futures ETFs to start trading in October 2021. DC Circuit Judges Neomi Rao, Sri Srinivasan, and Harry Edwards said in its August court ruling that the SEC, in denying the GBTC conversion, did not properly \u201cexplain its different treatment of similar products.\u201d\u00a0<\/p>\n Grayscale had asserted that bitcoin futures prices on the Chicago Mercantile Exchange (CME) are 99.9% correlated with spot market prices.<\/p>\n \u201cThe commission\u2019s unexplained discounting of the obvious financial and mathematical relationship between the spot and futures markets falls short of the standard for reasoned decisionmaking,\u201d the judges said in the initial decision.<\/p>\n Industry watchers previously noted that the SEC would not be forced to immediately approve GBTC\u2019s conversion to an ETF. But many agreed the judges\u2019 decision was a win for the industry<\/a>, particularly for those awaiting the approval of spot bitcoin ETFs.\u00a0<\/p>\n The SEC is set to decide on a spot bitcoin ETF<\/a> proposed by Ark Invest and 21Shares on Jan. 10. It could also look to rule on other similar planned products \u2014 by BlackRock, Fidelity and others \u2014 at that time in an effort not to give any one issuer a head-start, some industry watchers have speculated.<\/p>\n \u201cI expect the SEC to grant approval to spot bitcoin applications, which may include Grayscale, possibly as early as the end of this year,\u201d Haynes Boone law partner Arie Heijkoop told Blockworks last week<\/a>. \u201cBut 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>\nBitcoin ETF approval incoming?<\/h2>\n
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