Grayscale Wins Lawsuit Against SEC, Paving the Way for Bitcoin Spot ETF Approval

2023-08-29 15:33:53

Few people may remember it, but last year asset manager Grayscale submitted an application to the US Securities and Exchange Commission (SEC) for permission to convert the spot Grayscale Bitcoin Trust (GBTC.PK) ETF (exchange-traded investment fund). The regulator rejected the asset manager’s request, but approved bitcoin future ETFs. With the help of the latter, bitcoins can be bought and sold at a predetermined price. Grayscale made the right decision to sue the SEC The company then offered the same safeguards for the spot Bitcoin ETF as for the future ETFs, but according to the SEC, this was not enough. Grayscale, however, sued the regulator against the other rejected companies. Since this is an authority, the case went straight to the Court of Appeal. And a few minutes ago, the Washington District Court ruled that the SEC wrongfully denied Grayscale’s application. The court ordered that the review petition be granted and the SEC’s earlier order be set aside. This means that the authority must now re-examine the application. The judge called the rejection of the Grayscale spot bitcoin ETF an “arbitrary” decision, as the SEC did not provide an explanation for the different treatment of the two similar products. Of course, this does not mean that the application will be approved at the next review. But it certainly strengthens the direction that sooner or later a bitcoin spot ETF will also be approved. Incidentally, as a result of the decision, the price of bitcoin also jumped, at the time of writing the article is already trading at nearly 28,000 dollars per coin. By the way, Grayscale is owned by the Digital Currency Group, which also includes Coindesk. Grayscale’s above-mentioned product has been trading at a discount to the underlying asset since February 2021. This discount was already reduced to a record low of 50% in December, when the SEC rejected the ETF conversion request. However, when BlackRock and other large asset managers announced that they were asking for a discount on a bitcoin spot ETF, the discount rate dropped to around 25%. And if Grayscale can convert the Trust into an ETF now, it will completely eliminate the discount. Due to the nature of ETFs, they trade around their fair value.
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