Grayscale Scores Major Win in Court: Is a Bitcoin Spot ETF Up Next?

Pivotal Verdict Sets The Stage for Bitcoin Spot ETFs

In what can only be described as a tectonic shift in the regulatory landscape surrounding Bitcoin ETFs, the DC Circuit court has sided with Grayscale Investments, thereby quashing the U.S. Securities and Exchange Commission’s (SEC) prior rejection of Grayscale’s spot Bitcoin ETF proposal. This momentous verdict is already reshaping industry perspectives on how the saga surrounding spot Bitcoin ETFs might unfold.

Uncharted Regulatory Waters: A Fork in the SEC’s Path

Jake Chervinsky, Chief Policy Officer at the Blockchain Association, was effusive about the monumental nature of the ruling. He elucidated that it is exceedingly rare for a federal circuit court to find a regulatory body like the SEC in breach of the Administrative Procedure Act (APA). Specifically, the court was unequivocal in rejecting the SEC’s argument that Grayscale’s ETF proposal did not sufficiently

“prevent fraudulent and manipulative acts and practices.”

Although the court stopped short of obliging the SEC to greenlight the ETF, it did compel the regulatory body to reconsider Grayscale’s application in light of the court’s findings. This has spawned speculation around various scenarios the SEC might undertake. On one hand, the SEC could potentially concoct another rationale for denying the application, consistent with what some see as its deep-seated antipathy toward the cryptocurrency realm. Conversely, the SEC might interpret this as a graceful opportunity to pivot away from their entrenched anti-ETF position, particularly as other influential players like Blackrock are lobbying for a Bitcoin ETF.

The court has not explicitly provided a timeline for the SEC’s subsequent steps, but ETF analyst James Seyffart emphasized that the SEC has 45 days to file for an en banc hearing, involving all 17 judges on the court. This could be an avenue to either revoke current listings of Bitcoin Futures ETFs or proffer new denial reasons—perhaps focusing on custody or settlement issues, which have been central themes in the SEC’s Staff Accounting Bulletin 121 (SAB 121).

Adam Cochran, a partner at CEHV, added that the SEC is facing impending decisions on six other Bitcoin spot ETF applications, thereby further complicating the regulatory tableau. His estimate posits a possible timeline for approval in late October or November, barring an SEC appeal.

With Bitcoin trading at $27,466, up 5.3% in the last 24 hours at the time of this writing, it is clear that the market is already responding to this sea change, even as the SEC is presented with a labyrinth of options.