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Grayscale Secures Court Order in Battle Against SEC Over Bitcoin ETF Approval

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“Grayscale’s court order victory against the SEC paves the way for a potential Bitcoin ETF, sparking excitement and optimism among crypto enthusiasts and investors.”

A federal appeals court has ruled in favor of Grayscale Investments LLC in its bid to create a Bitcoin exchange-traded fund (ETF), despite objections from the US Securities and Exchange Commission (SEC). The court’s decision sends the matter back to the SEC and enforces the court’s previous ruling in August, which overturned the SEC’s rejection of Grayscale’s proposal. The SEC had claimed that a Bitcoin-based ETF lacked sufficient oversight to detect fraud, but the court deemed this decision “arbitrary and capricious.”

The approval of ETFs based on cryptocurrencies is seen as a significant moment for the digital asset industry, as it could lead to broader access and mainstream acceptance. Recent scandals and bankruptcies have caused the estimated value of the sector to decrease by over half since late 2021, to around $1 trillion, with Bitcoin accounting for approximately half of this value.

Following the court’s decision, Bitcoin’s price climbed above $31,000 for the first time since July. The crypto market is closely watching efforts by asset managers to gain approval for ETFs, with several firms, including BlackRock Inc., seeking to offer these products. Last week, Bitcoin experienced a brief surge in price after an erroneous report claimed that BlackRock had received SEC approval for its Bitcoin ETF.

The SEC’s decision not to appeal the appeals court’s ruling on Grayscale’s proposal is seen as a win for the cryptocurrency industry and a setback for SEC Chair Gary Gensler’s efforts to tighten regulations in the sector. Grayscale has stated that converting its trust into an ETF would allow for easier creation and redemption of shares, addressing the current issue of trading at a discount compared to the underlying Bitcoin. The discount on Grayscale Bitcoin Trust has already narrowed significantly in anticipation of an ETF conversion.

While the ruling in favor of Grayscale is a positive development, the approval and timing of spot ETFs for cryptocurrencies remain uncertain. ETFs investing in Bitcoin futures were approved in 2021, but ETFs investing in futures on Ether, the second-largest cryptocurrency, failed to gain traction when they debuted in the US in October. Nonetheless, the court’s decision represents a step forward for the industry and could open the door for billions of dollars in investment from everyday investors.

Please note that this article was provided by Bloomberg News.

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