Grayscale’s Win Will Be Kept; SEC Refrains from Appeal

The United States Securities and Exchange Commission (SEC) has received a hit from the court against Bitcoin fund manager, Grayscale. The latter won the lawsuit filed against the American regulator in the wake of rejecting an application to convert Bitcoin fund GBTC into a spot Bitcoin ETF. After the court’s decision in favor of Grayscale, it was expected that the SEC may appeal. But the financial watchdog reportedly is not considering moving ahead with it. 

Reuters reported, citing people with information on the matter, that in August 2023, the District of Columbia Court of Appeals in Washington ruled out against SEC. The court noted that the regulator did wrong by rejecting the proposed Bitcoin spot exchange traded-fund (ETF). The instance marked a huge turning point as the decision was in favor of the industry waiting for about a decade for financial products to get approval. 

Now that it’s more or less confirmed that the SEC might not consider an objection to the court’s decision supporting Grayscale, the only possibility left is for the regulator to consider moving ahead with approving the request. The tussle between the companies filing for crypto ETFs and US financial regulators is a saga in itself.

The SEC approved Bitcoin futures ETFs in 2021 when it let ProShares Bitcoin Strategy ETF (BITO) get listed on the New York Stock Exchange (NYSE) and start trading. Yet, it has been reluctant to approve any spot product underlying crypto assets like Bitcoin. Despite that, there’s not much difference in the offerings as they both track the same assets, with different strategies. 

Grayscale and US Court Holds Similar Stance

According to Reuters, in its argument, while filing a lawsuit against the SEC, Grayscale stated that the agency had approved certain similar “surveillance agreements” safeguarding investors by preventing fraud in Bitcoin futures ETFs. So it is also possible to implement similar measures to provide a required safety net for spot Bitcoin ETF offering from Grayscale. 

Fundamentally, both products rely on the price of Bitcoin (BTC). In the decision against the SEC, the appeals court stated a similar ruling that the decision of the financial regulator would be considered random as it did not approve Grayscale’s application for spot Bitcoin ETF. It did not even give any clarification for the decision or justify how both the offerings are different. 

Apparently, the SEC is left with no other option than to consider approving Grayscale’s request for the conversion of the biggest Bitcoin fund, Grayscale Bitcoin Trust Co. (GBTC), into a spot Bitcoin ETF. 

The appeals court, Reuters noted, is likely to provide a directive specifying how its decision should be implemented. This is expected to involve instructing the SEC to re-examine Grayscale’s spot Bitcoin ETF application.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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