Grayscale Wins Lawsuit Against SEC
Grayscale Investments, a leading crypto asset manager, has won a significant lawsuit against the United States Securities and Exchange Commission (SEC) regarding its efforts to convert its over-the-counter Grayscale Bitcoin Trust (GBTC) into a listed Bitcoin (BTC) exchange-traded fund (ETF). The SEC had previously rejected Grayscale's GBTC application, citing concerns that the products were not «designed to prevent fraudulent and manipulative acts and practices». However, the U.S. Court of Appeals Circuit Judge Neomi Rao ruled that the SEC's decision was "arbitrary and capricious" and ordered the SEC's order to be vacated. This means that the SEC must review Grayscale's application again.
The court's ruling was based on the SEC's inconsistent treatment of applications for Bitcoin futures ETFs, which it had approved, and for regular ETPs, or exchange-traded products, which Grayscale had sought. Grayscale argued that its proposed Bitcoin ETF is «materially similar» to the approved Bitcoin futures ETFs, as the underlying assets — bitcoin and bitcoin futures — are closely correlated, and the surveillance sharing agreements with the CME are identical and should have the same likelihood of detecting fraudulent or manipulative conduct in the market for bitcoin.
The outcome of this lawsuit is expected to have broader implications for the cryptocurrency industry and the regulatory landscape surrounding it. Grayscale's victory could pave the way for other companies that want to create Bitcoin ETFs. However, the court's order does not guarantee the eventual listing of a Grayscale spot Bitcoin ETF. If Grayscale ultimately prevails and the SEC does not appeal, the court would specify how its decision should be executed, which could include instructing the SEC to approve the application or to revisit it.
The following Bitcoin ETFs are currently under consideration by the SEC:
Bitwise: The SEC is expected to respond to Bitwise's application by September 1, 2023.
VanEck: VanEck's application is also awaiting the SEC's decision. However, it is important to note that the SEC had previously disapproved VanEck's proposal in 2021.
BlackRock and WisdomTree: The SEC has accepted BlackRock's application for a spot Bitcoin ETF, and it is currently under review same as application of the WisdomTree that was accepted at nearly the same time.
Fidelity: Fidelity has refiled its application for the Wise Origin Bitcoin Trust, a spot Bitcoin ETF, which is also under review by the SEC.
Moreover, the court's decision may set a precedent for other crypto asset managers seeking to launch their own bitcoin ETFs, further expanding the range of investment options available to investors in the crypto market.
Grayscale's win also had a noticeable impact on Bitcoin price. Following the court ruling, Bitcoin price surged more than 5% to $27,472. The victory instilled new confidence in investors and stakeholders, leading to a surge in demand for Bitcoin and driving up its price. The market interpreted this legal victory as a positive precedent for wider acceptance of investment in digital assets, which catalyzed increased trading activity and contributed to Bitcoin remarkable price growth.
Grayscale's win against the SEC is a positive development for the crypto market, as it could lead to increased investment and greater mainstream acceptance of cryptocurrencies. However, the final outcome and its impact on the market will depend on the SEC's response and any further regulatory developments.