Grayscale Registers Major Victory Against SEC in Spot Bitcoin ETF Case, BTC Price Shoots

On Tuesday, August 29, the world’s largest digital assets manager Grayscale secured a major victory against the U.S. Securities and Exchange Commission (SEC) in its ongoing lawsuit.

The U.S. Court of Appeals for the D.C. Circuit ruled in favor of Grayscale allowing to them to convert their Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. This decision is likely to impact other spot Bitcoin ETF applications as well filed by giants such as BlackRock, Fidelity, and others.

Referring to crypto ETF products, the court said: “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”

A spot Bitcoin ETF trading would involve the use of a conventional stock exchange for trading, while a brokerage would hold the actual bitcoin. This setup enables investors to access the largest cryptocurrency globally without needing to possess the digital coin. Numerous cryptocurrency enthusiasts anticipate that the authorization of a spot bitcoin ETF could drive greater adoption by mainstream institutional players.

Grayscale filed a lawsuit against the SEC last year in June 2022 after the Commission rejected their offer of converting their GBTC product to a spot Bitcoin ETF. Commenting on the recent developments, the SEC said: “We are reviewing the court’s decision to determine next steps”.

According to a representative from Grayscale, the court’s ruling is a significant advancement for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the enhanced safeguards provided by the ETF structure.

“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,” the representative added.

Soon after the court ruling on Tuesday, the crypto market reacted with sharp surge. The Bitcoin price gained by more than 7% moving past $27,500. This comes as a fresh catalyst to the otherwise suffering crypto markets. Additionally, the altcoins have also made modest gains with the top ten altcoins rallying anywhere between 4-10%.

At the same time the GBTC shares saw strong trading volumes on Tuesday. The GBTC stock price surged by 17% on Tuesday registering the biggest single-day gains since July 2021.

Note that the court ruling doesn’t mean that the GBTC will automatically convert to spot Bitcoin ETF. The SEC can continue its crackdown further, this time using different reasons. Market analysts believe that the SEC will now crackdown on the lack security offered by the crypto custodians.