A federal judge has overturned the United States Securities and Exchange Commission’s (SEC) denial of Grayscale Investments’ exchange-traded fund (ETF) proposal for its Bitcoin Trust.
However, experts caution that this ruling does not guarantee the immediate approval of the first Bitcoin ETF in the country.
Judge Neomi Rao of the U.S. Court of Appeals for the District of Columbia Circuit ruled on August 29 that Grayscale’s Bitcoin ETF plan was “materially similar” to already approved Bitcoin futures exchange-traded products by the SEC.
Rao’s decision largely criticized the SEC’s reasoning for rejecting Grayscale’s ETF, which was based on the ETF not being “designed to prevent fraudulent and manipulative acts and practices.”
Consequently, the matter will be sent back to the SEC for further review.
The U.S. SEC has consistently rejected applications for spot cryptocurrency ETFs thus far. Various applications, including those from BlackRock, ARK Invest, Bitwise Asset Management, and others, are currently under review.
The commission retains the authority to delay decisions on these applications, potentially postponing approvals until March 2024.
The SEC has not yet publicly commented on the appeals court’s ruling, but reports suggest that the commission will assess the case to determine its subsequent steps.
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While the SEC may contest the ruling, experts speculate that Grayscale’s initial triumph might set a precedent for future approvals.
ETC Group’s CEO, Tim Bevan, expressed confidence that the victory would pave the way for U.S. spot Bitcoin ETFs despite an anticipated SEC appeal.
He predicted a likely mass approval of applications meeting requirements, possibly occurring in the first quarter of 2024.
Alex Adelman, CEO and co-founder of Lolli, contended that the appeals court’s decision would pressurize the SEC to reconsider its stance on spot Bitcoin ETFs.
Adelman perceived the surge in BTC price following the news as a “vote of confidence” in investment products linked to Bitcoin.
The Crypto Council for Innovation (CCI) spokesperson noted that the ruling broadens the scope for various investors to introduce spot Bitcoin vehicles in the U.S., bringing spot Bitcoin ETFs closer to potential launch.
The next steps for Grayscale or the SEC remain uncertain. Grayscale could rework its application to align more closely with a Bitcoin futures-linked ETF.
Alternatively, the SEC might opt for an “en banc” hearing involving all judges on the D.C. circuit, rather than the three who presided over the Grayscale case.
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