- The US SEC erred in rejecting Grayscale Investments‘ request to establish an exchange-traded fund to invest in spot bitcoin.
- The decision is a major boost for the ten-year industry attempt to develop a Bitcoin ETF product.
- If the SEC challenges the Grayscale decision, the matter will either be heard by the US Supreme Court or the whole D.C. appeals court.
A federal appeals court found on Tuesday that the US Securities and Exchange Commission erred in rejecting Grayscale Investments’ request to establish an exchange-traded fund to invest in spot bitcoin. This decision could pave the way for the introduction of the first product of its sort.
A three-judge panel of the District of Columbia Court of Appeals in Washington ruled that the Securities and Exchange Commission (SEC) should reconsider its decision because it did not adequately explain its justification for rejecting Grayscale’s product.
US Court Rules
All proposed bitcoin ETFs, including Grayscale’s, were rejected by the US Securities and Exchange Commission (SEC) because they did not adhere to its standards for preventing market manipulation.
The decision is a major boost for the ten-year industry attempt to develop a Bitcoin ETF product. Michael Sonnenshein, CEO of Grayscale, referred to the court ruling as a “historic milestone for American investors.”
The cryptocurrency industry has praised the decision, and the SEC has 45 days to file an appeal. Other asset managers have comparable SEC filings for a spot bitcoin ETF in progress, including BlackRock, Fidelity, and Invesco.
In June 2022, the SEC denied Grayscale’s request for a spot bitcoin ETF, claiming that the proposal did not adhere to criteria for investor safety and anti-fraud. The SEC was found to have failed to adequately justify its disagreement with Grayscale’s claim that the spot and futures markets for Bitcoin are 99.9% linked.
The decision follows a judge’s determination in July that Ripple Labs did not break any federal laws by offering its XRP token on public exchanges. This decision is the second significant legal success for the cryptocurrency industry in recent weeks.
If the SEC challenges the Grayscale decision, the matter will either be heard by the US Supreme Court or the whole D.C. appeals court. If the SEC decides not to file an appeal, the court would issue a mandate outlining how its decision should be carried out, which might include directing the SEC to approve the application or reconsider Grayscale’s application.
It’s unclear how the decision would impact the spot bitcoin ETF proposals BlackRock and other companies submitted in June.
