Breaking: Grayscale Wins US SEC Lawsuit On Spot Bitcoin ETF

In a landmark judgment, a US Court of Appeals for the District of Columbia Circuit handed Grayscale a win against the Securities and Exchange Commission (SEC) in the lawsuit over converting the Grayscale Bitcoin Trust to a spot Bitcoin ETF. With the recent flurry of spot ETF flings from the likes of Blackrock and Fidelity, the Grayscale lawsuit victory could be a major development towards having the first ever spot Bitcoin ETF approved in the United States.

Also Read: XRP And Cardano Records Buying Amid Largest Crypto Funds Outflow

A spot ETF would essentially allow investors to gain exposure to Bitcoin indirectly, as against directly buying the cryptocurrency on a crypto exchange.

Grayscale Spot Bitcoin ETF: Towards Approval

With the judgment, the judge cleared the way for approval of the Grayscale spot Bitcoin ETF. The judge said that the SEC failed to recognize the “obvious financial and mathematical relationship between the spot and futures markets.” However, this does not effectively mean that the spot ETF approval is imminent, but the judgment definitely paved a clear path to the approval in a definite timeline. It also remains to be seen if the US SEC considers a review of the Court’s order.

The Court’s judgment stated:

“It is ordered and adjudged that Grayscale’s petition for review be granted and the Commission’s order be vacated, in accordance with the opinion of the court filed.”

Meanwhile, the Bitcoin BTC price rallied in reaction to the lawsuit judgment.

Grayscale’s Argument

The judgment came after arguments from both sides were heard on whether or not to approve of the company’s spot ETF application. Grayscale’s argument was centered around the US SEC’s lack of sufficient reason to reject the spot ETF when the futures ETF was already approved. It argued in court that the bitcoin futures ETF surveillance arrangements should also justify the case for the spot ETF, as both the ETFs are based on the Bitcoin price. Judge Srinivasan Rao stated that agencies like the US SEC should treat like cases alike, adding that it failed to give fair reasoning as to why it denied the Grayscale application.

Accordingly, the judge remarked that the SEC’s decision was arbitrary as it failed to explain its unfair treatment of similar products. Hence, the approval could now act as a precedent for the US SEC’s approval of the spot Bitcoin ETF. Already, asset management firm Blackrock along with Fidelity, WisdomTree, VanEck, Bitwise and Invesco are vying for the spot ETF approval.

US SEC Appeal of Judgment

James Seyffart, an ETF expert with Bloomberg, said the US SEC would have around 45 days to go for an en ban hearing. “En banc basically means the case is heard by all judges on the court (17 here) rather than just the subset panel of 3 judges like this initial decision,” he explained. Hence, the federal regulatory agency will have until mid-October 2023 to review the judgment and take a call on the appeal.

Interestingly, John Deaton, who represents the thousands of XRP token holders in the famous XRP Vs SEC lawsuit, predicted a win for the company in the lawsuit against the SEC. On March 1, 2023, Deaton, a popular attorney in the crypto ecosystem, recalled that “The SEC has lost 4 out of last 5 cases before the Supreme Court.”

Meanwhile, Michael Sonnenshein, the chief executive officer of Grayscale, welcomed the judgment, saying that the company is currently reviewing the Court’s opinion and an update would be accordingly revealed. The Grayscale Bitcoin Trust (GBTC) price rose by as much as 17% in response to the judgment.

Also Read: Terra Luna Classic Requisite Market Swap Reopening For LUNC And USTC To $1