Grayscale has emerged victorious in a lawsuit against the US Securities and Exchange Commission (SEC) regarding the conversion of the Grayscale Bitcoin Trust into a spot Bitcoin Exchange-Traded Fund (ETF).
This favorable judgment by the US Court of Appeals for the District of Columbia Circuit could mark a pivotal step toward the approval of the first-ever spot Bitcoin ETF in the United States, amidst a flurry of ETF applications from industry giants such as BlackRock and Fidelity.
Court Ruling Clears Path for Grayscale’s Spot Bitcoin ETF Approval
The recent court ruling has provided Grayscale with a substantial stride towards securing approval for its spot Bitcoin ETF. The presiding judge emphasized that the SEC had not adequately recognized the inherent financial and mathematical correlation between the spot and futures Bitcoin markets.
While this ruling doesn’t guarantee an immediate spot ETF approval, it does establish a clear trajectory for approval in the foreseeable future. The SEC may also contemplate reviewing the court’s order. Following the judgment, the value of Bitcoin (BTC) experienced a surge in response.
Grayscale’s Arguments
The court’s decision followed thorough deliberations from both sides on the matter of approving Grayscale’s spot ETF application. Grayscale’s argument centered on the inconsistency displayed by the SEC in rejecting the spot ETF while simultaneously approving the futures ETF.
The company contended that the surveillance mechanisms employed for the Bitcoin futures ETF should equally apply to the case of the spot ETF, given their shared foundation in Bitcoin’s price dynamics. Judge Srinivasan Rao underscored the importance of treating similar cases uniformly and criticized the SEC for inadequately justifying the discrepancy in its treatment of these products.
Consequently, this approval could establish a precedent for the SEC’s eventual green light for the spot Bitcoin ETF. Notably, major financial players like BlackRock, Fidelity, WisdomTree, VanEck, Bitwise, and Invesco are all competing for spot ETF approval.
Potential SEC Appeal
ETF expert James Seyffart from Bloomberg suggested that the SEC could opt for an en banc hearing within about 45 days. An en banc hearing entails the participation of the entire panel of 17 judges, instead of the initial three-judge subset.
This extension allows the regulatory agency until approximately mid-October 2023 to assess the judgment and determine whether to file an appeal.
Comparative Insights and Positive Predictions
John Deaton, a prominent figure representing XRP token holders in the XRP vs. SEC lawsuit, foresaw a victory for Grayscale in this legal battle. Deaton pointed out that the SEC had faced unfavorable outcomes in four of five recent cases before the Supreme Court.
In a positive response, Michael Sonnenshein, Grayscale’s CEO, expressed appreciation for the ruling. Also, he mentioned that the company was in the process of reviewing the court’s opinion, with an upcoming update expected. As an immediate result of the judgment, the price of the Grayscale Bitcoin Trust (GBTC) surged by up to 17%.
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