Grayscale beats the SEC: what the ruling means for spot Bitcoin ETFs
Post597 words
Explains the DC appeals court ruling that the SEC was wrong to reject Grayscale's conversion given approved futures ETPs. The ruling only forces a re-review, with a 45-day appeal window and seven spot BTC ETF deadlines due within 5 days.
Key claims
GBTC held over $15B AUM and traded at almost 50% discount to NAV earlier in 2023
Both parties have 45 days to appeal
The ruling does not oblige the SEC to approve, only to review again
What does the Grayscale victory mean? 👨⚖️🏆
Today, @Grayscale won a court case against the SEC that previously denied an application to convert its Bitcoin Trust into a $BTC Spot ETF.
$BTC, $ETH, other cryptocurrencies and even $COIN surged massively immediately on the news. But what does this decision actually mean and why is it exciting? Let's dive in! 👇
🔍 What happened?
On Tuesday, the U.S. District of Columbia Court of Appeals in Washington D.C. ruled that the Securities and Exchange Commission (SEC) was wrong to reject an application from crypto asset manager @Grayscale to list an exchange-traded fund (ETF) that tracks the price of bitcoin, in a landmark court decision.
The appeals court ruled that the digital asset manager had shown that its proposed #Bitcoin ETF was similar to the futures-based exchange-traded products that have previously been approved by the #SEC and should hence have received the same regulatory treatment.
The case has been closely watched by both the cryptocurrency & asset management industries, which have been trying for years to convince the #SEC to approve a spot #Bitcoin exchange-traded funds. ETFs would allow investors to gain exposure to Bitcoin, without having to actually own it, removing barriers of entry and making Bitcoin investments more accessible.
However, the SEC has denied multiple applications in the past, often citing concerns about #Bitcoin spot ETFs vulnerabilities to market manipulation, which was also a key issue the SEC brought forward with regards to @Grayscale's application to convert its trust into a spot ETF.
@Grayscale Bitcoin Trust is the largest over-the-counter (OTC) traded Bitcoin fund, with over $15 billion in assets under management. Earlier this year, shares of $GBTC traded at a discount of almost 50% compared to the net asset value (NAV). The large discount was mainly attributable to the firm’s then ongoing litigation with the SEC and credit concerns regarding its parent company, Digital Currency Group (DCG). After the court decision today the price of $GBTC has surged, narrowing the gap to NAV significantly already.
🔮 What happens now?
Both parties have 45 days to appeal the ruling, in which case it would either go to the U.S. Supreme Court or an en banc panel review. It is unclear if the #SEC will appeal at this point.
But if Grayscale ultimately prevails and/or the SEC does not appeal, the court would specify how its decision should be executed.
However, it's important to understand that this specific decision does not mean that the SEC must approve #Grayscale’s application. It only means that the SEC must review the application again. The #SEC could still reject the proposal on other grounds.
But many crypto executives see this as the next step in the race for a publicly-listed Bitcoin #ETF:
“Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the US.”
🗣 Tim Bevan, CEO of German digital asset provider ETC Group
“It virtually guarantees they will approve BlackRock and Fidelity.”
🗣 Dave Weisberger, CEO of CoinRoutes
What makes the situation even more interesting, is that there are deadlines coming up for the SEC within the next 5 days to comment on seven (!!!) $BTC spot ETF applications. Check the image below for more info.
With this landmark court decision paving the way, hopes in the crypto industry (and asset management industry) are high that Bitcoin spot #ETFs are very close.
And should we see $BTC spot ETFs like the @BlackRock ETF being approved this week already, I'm sure we'll see even more (upwards) volatility in the markets.
LFG (NFA)! 🚀
4 images on X
What came next · since 29 Aug 2023
Show how the 4 covered assets moved
This explainer walks through how things work without making a call on the token, so price moves since publication are shown as market context.
Covered, no call
$GBTCGrayscale Bitcoin Trustsince publication+238%+8.2% vs BTC
Mentioned for context
$COINCoinbasesince publication+99.6%−36% vs BTC
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