US Court Orders SEC To Review Grayscale’s Spot Bitcoin ETF

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The United States Court of Appeals for the DC Circuit has issued a mandate ordering the Securities and Exchange Commission to review Grayscale’s spot bitcoin ETF application. 

The final ruling effectively orders the agency to scrap its rejection of the application. 

SEC Ordered To Review Decision 

The court’s decision stems from its previous ruling that emphasized the similarities between Grayscale’s application and the already sanctioned Bitcoin futures ETFs. The court noted that Grayscale’s product merits approval due to its similar capacity to identify market misconduct. The final ruling effectively scraps the rejection of Grayscale’s spot bitcoin ETF application. The ruling solidifies the court’s initial ruling, which called the Securities and Exchange Commission’s decision “arbitrary and capricious.”

The decision was anticipated following the SEC’s reluctance not to contest the August ruling. The development also led to Grayscale filing a revised filing, hoping to transition its flagship GBTC fund into a fully-fledged ETF. 

Court Backs Grayscale 

The court mandate reinforces Grayscale’s position that its proposed Bitcoin ETF mirrors the characteristics of the already approved Bitcoin futures ETFs. This means it should not face any additional hurdles. Grayscale filed a resubmission application through an expedited S-3 filing. This move diverges from the standard S-1 process for new share offerings. Grayscale also plans to list its shares on the NYSE Arca. However, this depends on receiving the green light from the Securities and Exchange Commission on its current submissions, which includes a separate filing necessary for NYSE Arca. 

The ball now is in the SEC’s court and whether the agency could choose to approve Grayscale’s application or find other reasons to reject the application again. The agency is notorious for its scrutiny of applications, hence the uncertainty around the agency’s next steps. Grayscale spokesperson Jennifer Rosenthal stated, 

“The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF. GBTC is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors.”

Several Firms Seeking ETF Approval 

Grayscale is not the only major financial firm pursuing an ETF approval. Several other industry behemoths, such as Fidelity and BlackRock, have also filed spot bitcoin applications and are hoping for approval from the SEC. Securities and Exchange Commission Chair Gary Gensler has acknowledged receiving multiple filings from several firms. However, he has not spoken about Grayscale’s application or its progress. However, he did highlight the rigorous review processes that such applications undergo, comparing them with public offering vetting. He also underscored the SEC’s commitment to thorough evaluation. 

The growing list of spot bitcoin ETF applications indicates a growing appetite for such financial products. However, it also means the Securities and Exchange Commission must maintain a delicate balancing act. The SEC must navigate a complex landscape of ETF applications while ensuring there is a balance between market innovation and consumer protection.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.