Bloomberg’s Senior ETF Analyst Eric Balchunas recently highlighted that the Securities and Exchange Commission (SEC) could unveil a momentous decision concerning Grayscale Investments. This decision is expected to have significant implications for the approval of Bitcoin exchange-traded products (ETPs), capturing the attention and interest of industry players.
Grayscale Investments challenged the SEC’s refusal to approve its Bitcoin ETP application, arguing for a fair and consistent approach to all issuers. At the heart of the controversy lies the SEC’s acceptance of leveraged Bitcoin futures ETFs while rejecting spot Bitcoin ETF applications. Grayscale deems this decision inconsistent and arbitrary, setting the stage for an ongoing dispute.
Today’s pending announcement marks a pivotal moment in this ongoing dispute. Grayscale’s contention with the SEC extends beyond its proprietary interests and carries broader implications for the entire crypto industry. Initially, Grayscale sought to list the Grayscale Bitcoin Trust (GBTC) for trading on the NYSE Arca exchange, but the SEC rejected this request in 2022. In response, Grayscale filed a legal challenge, questioning the apparent inconsistency in policy between approving Bitcoin futures ETFs and denying spot Bitcoin ETF applications.
Various asset managers, including BlackRock, ArkInvest, and VanEck, have recently submitted spot Bitcoin ETP filings to the SEC. These filings highlight intended surveillance-sharing agreements with crypto exchange Coinbase, a strategic move that some believe could secure SEC approval. However, Grayscale argues that surveillance sharing with an unregulated platform like Coinbase is insufficient to meet the criteria for approving a Bitcoin ETP, considering prior indications from the SEC.
Bloomberg’s senior legal analyst suggests that there is a 70% chance of a favorable outcome in the final decision regarding Grayscale’s case. Nevertheless, stakeholders are urged to prepare for any outcome, emphasizing the elusive nature of certainty within the digital asset domain.
Intriguingly, finance lawyer Scott Johnsson shared insights into the potential timeline for Grayscale’s case. Based on historical data, Johnsson notes that 94% of cases argued in March 2021 and 2022 received decisions within 160 days of oral arguments. Considering that 160 days have already passed since Grayscale’s oral argument in March 2023, it suggests that a verdict is imminent.
Furthermore, Johnsson highlights the typical pattern of DC law clerks cycling in and out in August. This cycle prompts judges to clear their caseloads before the new incumbents arrive. Based on this pattern, Johnsson suggests that a decision could be expected in August. He also points out that all March 2022 cases argued before the DC Circuit were decided within 154 days, except for a single outlier at 170 days. These observations further solidify the rationale behind expecting a decision soon.
As the industry eagerly awaits the SEC’s decision on Grayscale’s case, it is important to consider these contextual observations. They shed light on the likely timing of the decision, illustrating how legal norms and procedural routines can guide our expectations in the ever-unpredictable crypto sphere. Regardless of the outcome, this ongoing dispute serves to shape the future of Bitcoin exchange-traded products and the regulatory landscape surrounding them.
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