U.S. Court Rules SEC's Rejection of Grayscale's Bitcoin ETF Proposal Inaccurate
In a groundbreaking decision, a federal appeals court has ruled that the U.S. securities regulator erred in dismissing Grayscale Investments' application to establish a spot bitcoin exchange-traded fund (ETF). This landmark victory has the potential to pave the way for the creation of the first-ever product of its kind.
A three-judge panel from the District of Columbia Court of Appeals in Washington determined that the Securities and Exchange Commission (SEC) had not provided a comprehensive explanation for its denial of Grayscale's proposal. The court has called on the SEC to reevaluate its decision. Following this news, the price of bitcoin, the world's largest cryptocurrency, surged by over 6% to $27,858.
A spot bitcoin ETF would mirror the underlying market price of the cryptocurrency, granting investors exposure to the digital asset without the need to directly purchase the currency. The SEC had previously rejected all bitcoin ETF proposals, including Grayscale's, citing concerns over potential market manipulation.
While the court ruling doesn't guarantee automatic approval for Grayscale's ETF, it significantly bolsters the decade-long endeavor within the industry to develop a bitcoin ETF product. Grayscale CEO Michael Sonnenshein labeled the court's decision as a "historic milestone for American investors."
Grayscale is currently assessing the details of the ruling and planning its "next steps with the SEC," as stated by a company spokesperson.
The SEC has a 45-day window to contest the ruling by lodging an appeal. An SEC spokesperson noted that the agency is in the process of reviewing the court's decision to determine its subsequent actions.
The cryptocurrency sector swiftly celebrated the ruling, recognizing its implications. Other asset management firms like BlackRock, Fidelity, and Invesco have similar filings awaiting review by the SEC for their own spot bitcoin ETFs. Ji Kim, General Counsel and Head of Global Policy at the Crypto Council for Innovation, commented, "This ruling is not just about Grayscale or Bitcoin, it sets a precedent for the broader crypto industry."
This marks a notable triumph for the crypto industry, following another significant legal win in which a judge ruled in July, in response to a case brought by the SEC, that Ripple Labs did not violate federal laws by trading its XRP token on public exchanges. The SEC has expressed intentions to challenge that ruling.
Should the SEC opt to appeal the Grayscale decision, the case would either move to the U.S. Supreme Court or undergo a review by the entire D.C. appeals court.
If the SEC elects not to appeal, the court would issue a mandate specifying the execution of its decision. This could involve directing the SEC to approve the application or reconsider Grayscale's proposal, potentially leading to a rejection on different grounds.
The repercussions on the proposals presented by BlackRock and other firms in June for spot bitcoin ETFs are yet to be determined. The SEC has yet to announce its decisions on those applications.