The U.S. SEC Fails to Appeal Court Decision on Grayscale’s Application for Spot Bitcoin ETF
The U.S. Securities and Exchange Commission (SEC) has missed the deadline to appeal a court ruling against its rejection of Grayscale’s spot bitcoin ETF application. Reports suggest that the agency does not plan to appeal the decision, opening the possibility for the application to be reviewed.
Court Decision in Favor of Grayscale’s Application
The SEC has chosen not to appeal a court decision that supports Grayscale’s bid to convert its bitcoin trust (GBTC) into a spot bitcoin exchange-traded fund (ETF). Grayscale had challenged the SEC’s denial of the conversion, and at present, the regulator has not filed an appeal within the 45-day timeframe.
SEC’s Rejection Overturned
In late August, the U.S. Court of Appeals for the District of Columbia Circuit overturned the SEC’s rejection of Grayscale’s attempt. The Commission’s refusal was deemed “arbitrary and capricious” by the presiding Circuit judge, as there was no clear explanation for treating similar products differently.
Potential for a Spot Bitcoin ETF
A spot bitcoin ETF would allow investors to gain exposure to bitcoin without owning it directly. The crypto industry and financial market participants have been seeking regulatory approval for this type of offering.
SEC’s Stance on Bitcoin ETFs
Although the SEC has approved ETFs that hold bitcoin futures contracts in 2021, it has yet to approve a spot bitcoin ETF. This year, however, the securities regulator has accepted several proposals, including one from Blackrock, for review.
Delay in Final Decisions
The SEC has postponed its final decisions on various applications, including those from Blackrock, Valkyrie, Bitwise, Invesco, Ark 21shares, and Global X. The regulator also deferred its judgement on funds from Wisdomtree, Vaneck, and Fidelity at the end of August. The SEC has until next year to make a decision.
Next Steps for Grayscale
The appeals court is expected to issue a mandate outlining how its decision should be implemented. This may include instructing the SEC to revisit Grayscale’s application. Analyst James Seyffart suggests that dialogue between Grayscale and the regulator will likely begin next week.
Hot Take: Opportunity for a Spot Bitcoin ETF
The U.S. SEC’s failure to appeal the court decision on Grayscale’s spot bitcoin ETF application opens up the potential for a new type of investment opportunity in the form of a spot bitcoin ETF. With this development, investors could gain exposure to bitcoin without having to directly own it. While the SEC has approved ETFs holding bitcoin futures contracts this year, it has yet to give the green light to a spot bitcoin ETF. The decision on Grayscale’s application could signal a shift in regulatory stance and pave the way for other similar offerings in the future.
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