Court of Appeals Grants Grayscale’s Petition, Vacates SEC Order
The Court of Appeals for the D.C. Circuit recently granted Grayscale Investments’ petition to review an SEC order that had blocked the Grayscale Bitcoin Trust from listing on the NYSE Arca exchange. This ruling gives Grayscale the go-ahead to convert its closed-end fund into an exchange-traded fund (ETF).
SEC Acted in an “Arbitrary and Capricious Manner”
The SEC denied a proposed rule change in July 2022, claiming that NYSE Arca did not have the proper surveillance-sharing agreement for Bitcoin trading. Grayscale challenged this decision, arguing that the surveillance arrangements for Bitcoin futures ETFs should satisfy the requirements for a spot Bitcoin ETF as well.
Court Rules in Favor of Grayscale
On August 29, 2023, the Court of Appeals sided with Grayscale, finding that the SEC exceeded its legal authority and acted in an “arbitrary and capricious manner” by requiring the surveillance-sharing agreement. The court’s judgment vacates the previous SEC order and requires the SEC to reconsider the proposed rule change for the Grayscale Bitcoin Trust without the same surveillance-sharing agreement.
US on the Path to Its First Spot Bitcoin ETF
This ruling is a positive development for spot Bitcoin exchange-traded funds (ETFs) in the United States. It opens the door for the Grayscale Bitcoin Trust to list on NYSE Arca, potentially paving the way for other Bitcoin ETFs. Leading investment managers like BlackRock, Invesco, and WisdomTree are eagerly awaiting the outcome of their applications, although BlackRock faces some controversy regarding its investment priorities and presence in China.
Price of Bitcoin Spikes Following the Announcement
Unsurprisingly, the price of Bitcoin saw a significant spike after the Court of Appeals ruled in favor of Grayscale and vacated the SEC order.
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