A federal appeals court may have just cleared the way for Bitcoin exchange-traded funds (ETFs).
Key Details
- The U.S. Securities and Exchange Commission (SEC) lost in a lawsuit from Grayscale, with the U.S. Court of Appeals for the D.C. Circuit ruling on Tuesday in the crypto asset manager’s favor.
- After denying Grayscale’s October 2021 application to turn Grayscale Bitcoin Trust into an ETF, the court has determined that the SEC denied the proposal on “arbitrary and capricious” grounds, according to Judge Neomi Rao.
- The SEC is not required to permit Grayscale’s application but is now being forced to reevaluate the application, likely providing a path forward for other similar Bitcoin ETFs, given the SEC’s approval of Bitcoin futures.
- Bitcoin’s value has rallied 4.4% since Tuesday afternoon, briefly spiking 6% after the ruling before settling at a value of over $27,000 per token. CoinBase has similarly rallied 11.3% since Tuesday morning.
Why It’s News
The decision is a major victory for cryptocurrency financial technology companies, with multiple large financial institutions similarly preparing to apply for Bitcoin ETFs—including BlackRock and Fidelity.
The SEC argued that Grayscale’s ETF application failed to address concerns related to potential market manipulation and investor protections and has used a similar approach to deny multiple Bitcoin ETFs. However, Grayscale successfully argued that the SEC was unnecessarily hostile toward crypto and that the organization has approved similar futures applications.
The SEC has generally operated with hostility toward listed spot-market investments for digital assets, with Grayscale successfully noting that its application was “materially similar” to other approved applications.
Notable Quote
“[Tuesday’s rule is] a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper. The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” says a Grayscale spokesperson.
Backing Up A Bit
Crypto has been staring down a widespread crackdown from the federal government in the past year, with the White House, the Department of Justice, the SEC, the Federal Reserve, and Congress all advocating cracking down on crypto.
Digital assets continue to face an uphill battle with critics, with politicians like Senator Elizabeth Warren (D-MA) saying she is “building an anti-crypto army.” Republican politicians have generally been more friendly to crypto, as Democrats have soured on the concept following the collapse of FTX.
