The Washington Circuit Court of Appeals has made Grayscale Investments’ victory against the U.S. Securities and Exchange Commission official, shifting the buck back to the regulator.
A three-judge panel ruled unanimously in August that the SEC rejecting Grayscale’s proposal to convert its Bitcoin Trust (GBTC) into an ETF – but allowing the launch of Bitcoin futures funds – was “arbitrary and capricious.”
The court said at the time that the commission’s order denying the GBTC conversion would be “set aside.” The final warrant confirming his decision – filed Monday – comes 10 days later the 45-day deadline given to the SEC to appeal the legal loss to Grayscale has expired.
“The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC into an ETF,” a Grayscale spokesperson told Blockworks on Monday. “GBTC is operationally ready, and we intend to act as quickly as possible on behalf of our investors.
As some expected, the mandate did not provide clarity on next steps.
Bloomberg Intelligence analyst James Seyffart rated in an job last week: “This will not be a massive market development document dictating what the SEC should do. It’s procedural.
However, Nate Geraci, president of The ETF Store, said in a Sunday job that the formalized decision would be another step towards the timely approval of the Bitcoin ETF. The first proposal for such a product came in 2013.
“Say what you want about Grayscale, but their legal efforts have paved the way for every issuer,” Geraci wrote.
Bitcoin ETF approval incoming?
Optimism among a number of industry executives and industry observers regarding the potential approval of a spot Bitcoin ETF in the coming months has increased.
While the court mandate finalized Grayscale’s victory on Monday, some pointed out that the regulator could still deny GBTC’s conversion on different grounds.
The SEC could still ask the U.S. Supreme Court to review the appeals court’s decision, Elliott Stein, senior litigation analyst at Bloomberg Intelligence, said in a statement. interview last week. But this path is unlikely, he added.
“So it’s really back in the DRY court, so to speak,” Stein said. “And I think that’s going to be a discussion now between the SEC and Grayscale about moving forward.”
Grayscale filed an application to register GBTC shares under the Securities Act of 1933 on October 19 via a Form S-3 – marking another step in the process to ultimately transform the trust into an ETF.
An SEC spokesperson declined to comment on this matter.
SEC Commissioner Hester Peirce said in a statement interview With CNBC on Monday, she estimated that the regulator should approve a five-year spot Bitcoin ETF.
“The logic of why we didn’t (approve) one has always mystified me,” she added. “The trial is obviously an important factor in the landscape, but I can’t guess what my colleagues’ approach to this topic is.”
The SEC allowed Bitcoin futures ETFs to begin trading in October 2021. DC Circuit Judges Neomi Rao, Sri Srinivasan and Harry Edwards said in his August court ruling that the SEC, in denying the GBTC conversion , had not properly “explained its different treatment of similar products.”
Grayscale claimed that bitcoin futures prices on the Chicago Mercantile Exchange (CME) are 99.9% correlated to spot market prices.
“The commission’s unexplained ignorance of the obvious financial and mathematical relationship between the spot and futures markets does not meet the standards of reasoned decision-making,” the justices said in the initial ruling.
Industry observers have previously noted that the SEC would not be required to immediately approve the conversion of GBTC into an ETF. But many agreed the judges’ decision was a victory for the industryespecially for those waiting for approval of spot bitcoin ETFs.
SEC set to decide on Bitcoin spot ETF offered by Ark Invest and 21Shares on January 10. It could also seek to weigh in on other similar products planned — by BlackRock, Fidelity and others — at that time in an effort not to give any issuer a head start, some industry observers said . speculated.
“I expect the SEC to grant approval to spot Bitcoin applications, which may include Grayscale, perhaps as early as the end of this year,” Arie Heijkoop, associate attorney at Haynes Boone. said Blockworks last week. “But more likely early to mid 2024.”
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