According to the latest information, Grayscale has won its lawsuit against the SEC.
The court decided that Grayscale's request for review was accepted and the Commission's decision was annulled.
A US federal appeals court ruled that the US Securities and Exchange Commission's (SEC) rejection of Grayscale's spot Bitcoin ETF application was wrong.
The court stated that rejecting Grayscale's proposal was arbitrary and unlawful because the SEC failed to explain the differential treatment of similar products.
Bitcoin is currently up 3.5% at $27,000 after the US Court ruled that the SEC's rejection of the Grayscale spot Bitcoin ETF application was wrong.
The case has been closely watched by the cryptocurrency and asset management industries, which have been trying for years to persuade the SEC to approve a spot Bitcoin ETF.
In this way, they say, investors can have exposure to this money without having to own Bitcoin, the world's largest cryptocurrency. The SEC, on the other hand, is concerned that spot BTC ETFs will be open to manipulation.
Last year, the SEC rejected Grayscale's application to convert its spot Grayscale Bitcoin Trust into an ETF. While the institution rejects spot Bitcoin ETFs, it approves bitcoin futures ETFs that track agreements to buy or sell bitcoin at a pre-agreed price. Grayscale has suggested using the same manipulation measures approved for these futures ETFs, but the SEC said it doesn't meet its own standard.
Grayscale was just one of several asset managers, including Cathie Wood's ARK, Fidelity and Invesco, whose SEC has rejected spot bitcoin ETF applications on investor protection grounds. Unlike other companies, Grayscale sued the SEC. The case went directly to the appellate court as the defendant was a regulatory agency.
Grayscale argued that Bitcoin futures ETF surveillance arrangements should also be satisfactory for Grayscale's spot ETF because both products are based on BTC's underlying price.
Bitcoin futures ETFs track BTC futures traded on the Chicago Mercantile Exchange (CME), the main hub for these products. The SEC said the CME “monitors futures market conditions and price movements in real time and continuously to detect and prevent price distortions, including price distortions caused by manipulative efforts.”
Grayscale's chief attorney, Donald Verrilli Jr., told the court in March that a spot BTC ETF would “better protect investors” because it would benefit them from CME surveillance of the market.
But the SEC says it lacks data to determine whether Grayscale's CME futures surveillance deal can also detect potential manipulation in the spot markets.
Both parties have 45 days to appeal the decision, in which case the decision will go to either the US Supreme Court or en banc panel review. The Grayscale CEO said he was ready to appeal if the court ruled in favor of the SEC.
If Grayscale ultimately wins and the SEC does not appeal, the court will determine how the decision should be enforced. This may include instructing the SEC to approve or reconsider Grayscale's application; in which case the SEC may reject the proposal on other grounds.
Grayscale said the court decision is a tremendous step forward for American investors and the Bitcoin ecosystem.
*Not investment advice.