We have been writing for years about what had become an almost quixotic quest for US SEC approval of a spot Bitcoin ETF (see one of these articles here). The D.C. Circuit’s decision in the case Shades of grey case (see post here) represented a clear rejection of the SEC’s position and gave the industry hope that such approval could finally be obtained. Although this has not happened yet, this article takes stock of this subject.
There are currently nine applications before the SEC seeking approval of spot Bitcoin ETFs.
The Securities Exchange Act of 1934 sets certain deadlines within which the SEC must act, but, along the way, there are certain times when the SEC can extend the deadline within which it must respond. Last week, as the government shutdown approached, the SEC acted ahead of schedule or it would have had to extend the deadline for two of the requests. The second extended Global extended from November 11, 2023 to January 10, 2024.
On September 26, 2023, four House members — two Democrats and two Republicans — wrote to SEC Chairman Gary Gensler, urging him to immediately approve the listing of Bitcoin spot ETFs. In doing so, they took note of the court’s decision in Shades of grey which stated that a “Bitcoin spot ETP is indistinguishable from a Bitcoin futures ETP,” which the SEC approved.
The letter was sent just before Chairman Gensler’s testimony before the House Financial Services Committee on September 27, 2023. Despite the letter, the Chairman stated during his testimony that the SEC had not yet decided what made in response to the Grayscale decision.
Similarly, on October 2, 2023, Grayscale announced that it was seeking approval to convert its Ethereum Trust into a Spot Ether ETF. The Trust, like its Bitcoin Trust, invests in Ether futures as an indirect way of trying to mirror the ETF market. But the spot ETF will be able to invest directly in ETH. The Ethereum Trust is valued at nearly $5 billion.