Grayscale decision versus SEC may come today, latest Friday

Bloomberg’s Senior ETF Analyst Eric Balchunas stated that a potentially momentous decision from the SEC concerning Grayscale Investments could be revealed today, Aug. 15, or at the latest, this Friday, Aug. 18.

This decision is likely to have noteworthy implications for the approval of Bitcoin exchange-traded products (ETPs), with all eyes on Blackrock’s recent filing alongside countless others who followed suit, adding Coinbase as a partner under a ‘surveillance sharing agreement.‘

Grayscale challenged the SEC’s refusal to approve its Bitcoin ETP application, arguing for a fair and consistent approach to all issuers. The controversy stems from the SEC’s acceptance of leveraged Bitcoin futures ETFs while rejecting spot Bitcoin ETF applications, a decision Grayscale deems as inconsistent and arbitrary. Today’s pending announcement denotes the pivotal point of this ongoing dispute.

Grayscale impact on spot Bitcoin ETFs

Grayscale’s contention with the SEC is tied to its proprietary interests and has broader implications for the crypto industry. The firm initially filed to list the Grayscale Bitcoin Trust (GBTC) for trading on the NYSE Arca exchange, a request rejected by the SEC in 2022. Grayscale counteracted with a legal challenge, arguing that the SEC’s approval of Bitcoin futures ETFs while denying spot Bitcoin ETF applications represents an apparent inconsistency in policy.

Multiple asset managers, including BlackRock, ArkInvest, and VanEck, have recently submitted spot Bitcoin ETP filings to the SEC. These filings detail intended surveillance-sharing agreements with crypto exchange Coinbase, a move some believe could be the key to SEC approval.

Grayscale, however, insists that surveillance sharing with an unregulated platform like Coinbase is not enough to meet the criteria for approving a Bitcoin ETP based on prior SEC indications.

According to Bloomberg’s senior legal analyst, the final decision regarding Grayscale’s case has a 70% chance of being favorable. Notwithstanding, he advises stakeholders to prepare for any outcome, reinforcing the notion that certainty is an elusive luxury in the domain of digital assets.

Timeline and outliers for decisions

Intriguingly, Balchunas shared a post from Scott Johnsson, a finance lawyer, who shed light on the potential timeline for Grayscale’s case. According to Johnsson, 94% of cases argued in March 2021 and 2022 received decisions within 160 days of oral arguments. Currently, 160 days have passed since Grayscale’s oral argument in March 2023, suggesting that a verdict is imminent.

Johnsson also highlights the typical procedure of DC law clerks cycling in and out in August, propelling judges to clear their caseloads before the new incumbents arrive. Given this pattern, he suggests we might expect a decision in August.

He also noted that all March 2022 cases argued before the DC Circuit were decided within 154 days, except for a single outlier at 170 days. This further solidifies the rationale behind expecting a decision soon.

As the SEC’s decision on Grayscale’s case is awaited, these observations provide a crucial context for the likely timing, highlighting how legal norms and procedural routines can guide our expectations in the ever-unpredictable crypto sphere.

Editor’s Note: This article will be updated should further news become available.