In a significant turn of events, the U.S. Securities and Exchange Commission (SEC) has made the decision not to appeal a recent court ruling that deemed the rejection of Grayscale Investments’ application for a spot bitcoin exchange-traded fund (ETF) unjust. This move by the SEC could potentially expedite the review process for Grayscale’s application, which would provide investors with exposure to the world’s largest cryptocurrency, Bitcoin, without requiring direct ownership.
The District of Columbia Court of Appeals in Washington ruled in August that the SEC’s rejection of Grayscale’s proposed Bitcoin ETF was incorrect. However, the SEC has consistently denied all spot Bitcoin ETF applications, including Grayscale’s, on the grounds that the applicants lacked adequate measures to prevent market manipulation and safeguard investor interests.
Grayscale strongly argued that the SEC’s approval of surveillance agreements to combat fraud in Bitcoin futures-based ETFs should suffice for their spot ETF. They emphasized the SEC’s inconsistent treatment of spot and futures Bitcoin ETFs, despite both bearing similar risks and relying on the same underlying spot markets. Grayscale’s contention was based on the premise that both spot and futures funds are dependent on Bitcoin’s price.
The appeals court supported Grayscale’s argument, stating that the SEC failed to clarify the significant difference between spot and futures arrangements, thereby arbitrarily rejecting Grayscale’s application. This ruling has been welcomed by the cryptocurrency community and has had an immediate positive impact on Bitcoin’s price, which surged above $27,000.
The SEC’s decision not to contest the court’s ruling now opens up possibilities for other asset managers such as BlackRock, Fidelity, and Invesco. These firms also have similar filings pending with the SEC for a spot Bitcoin ETF. Consequently, these asset managers may benefit from the court ruling and have a higher likelihood of their applications being reviewed by the SEC in a timely manner.
With the SEC’s acceptance of the court ruling, the review process for Grayscale’s spot Bitcoin ETF application may be expedited. Additionally, other asset managers who have filings pending with the SEC may see an increased chance of their applications being approved. The SEC is expected to announce its decisions on these applications by the end of next year at the latest.
The SEC’s decision not to appeal the court ruling regarding Grayscale’s Bitcoin ETF application marks a significant milestone in the regulatory landscape for cryptocurrency. This ruling has sparked optimism among investors and the crypto community, as it potentially paves the way for more institutional investors to gain exposure to Bitcoin through ETFs. As the SEC’s review process progresses and more spot Bitcoin ETF applications are considered, the market can anticipate further developments in the intersection of traditional finance and cryptocurrencies.
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