The Securities and Exchange Commission (SEC) has opted not to contest a stark reversal of its initial decision, which denied Grayscale the opportunity to transform its bitcoin trust into a more investor-friendly exchange-traded fund (ETF).
This decision, as per a source well-acquainted with the matter, could potentially pave the way for the first-ever Bitcoin ETF in the United States.
The SEC had until the stroke of midnight on Friday to determine whether it would challenge the court’s ruling, but it appears that they will allow the deadline to elapse without pursuing an appeal, according to the same source.
This development was first reported by Reuters. Following the news, Bitcoin (BTC) experienced a surge, surpassing the $27,000 mark.
In August, the D.C. Circuit Court of Appeals issued a verdict declaring the SEC’s rejection of Grayscale Investment’s request to convert the Grayscale Bitcoin Trust (GBTC) into an ETF as unjust and arbitrary. The court insisted that federal agencies must handle similar cases consistently.
Circuit Judge Neomi Rao remarked in August, “The Securities and Exchange Commission recently sanctioned the trading of two bitcoin futures funds on national exchanges but declined approval for Grayscale’s bitcoin fund.”
Requests for comments from SEC representatives are pending at the time of this writing, and a spokesperson from Grayscale has opted not to provide a statement until the SEC’s decision is confirmed.
Grayscale Lawsuit Saga: SEC’s Stance and GBTC’s Bitcoin ETF Prospects
It remains uncertain how the SEC will proceed in its next interaction with Grayscale’s application. The agency still retains the authority to reject it on grounds separate from those disapproved by the courts.
Nevertheless, Grayscale may once again contest these grounds in a court of law. Grayscale initially submitted its proposal to convert its closed-end fund into an ETF in October 2021.
GBTC stands as the world’s largest cryptocurrency fund and has been trading at a discount relative to its bitcoin holdings since February 2021.
While this discount at one point reached nearly 50%, it has subsequently receded to approximately 17%. Grayscale has long advocated that the conversion of GBTC into an ETF would eliminate this discount, as it would bridge the pricing disparity between the fund and the underlying bitcoin.
The ETF structure permits a creation-redemption model, enabling the creation of new ETF shares to meet demand or their redemption to reduce supply.