Grayscale Emerges Victorious in the Btc Spot Etf Case against the Sec

On August 29th - The United States Court of Appeals for the District of Columbia Circuit ruled on Tuesday that the U.S. Securities and Exchange Commission (SEC)'s rejection of the application by crypto asset management company Grayscale Investments to list an exchange-traded fund (ETF) tracking

cryptocurrency

prices was incorrect.

Earlier, on October 12th, 2022, Grayscale had submitted an opening brief for its lawsuit against the U.S. Securities and Exchange Commission (SEC) for rejecting its application for a spot Bitcoin ETF. Grayscale's Chief Legal Officer, Craig Salm, stated that spot ETFs and futures ETFs “have no distinction in the context of Bitcoin” as “the pricing of CME Bitcoin futures itself is below the spot Bitcoin market.” The brief mentioned that the SEC failed to demonstrate why there would be fundamentally different treatment for Bitcoin futures ETP and spot Bitcoin ETP approvals, thus violating the basic requirements of the U.S. Administrative Procedure Act.

The news of Grayscale's victory in the legal case resulted in an 8% increase in the BTC price.

Grayscale Investments is a digital asset management company founded in 2013. Its primary business involves creating and managing a range of cryptocurrency investment trusts, allowing investors to access cryptocurrency investment opportunities within traditional financial markets. GBTC is one such trust fund, with its primary objective being to provide investors a way to participate in the Bitcoin market through the securities market without directly purchasing and holding Bitcoin. In addition to GBTC, Grayscale also manages other cryptocurrency trust funds such as Ethereum Trust (ETHE), Litecoin Trust (LTCN), and more.

Since October 28, 2014, the U.S. Securities and Exchange Commission (SEC) suspended the “GBTC redemption mechanism” due to allegations of “manipulating the GBTC redemption price.” Furthermore, after its primary market issuance, GBTC has a 6-month lock-up period before it can be traded on the secondary market.

Currently, Grayscale's funds hold over 620,000 BTC, with a total value exceeding $17 billion. Due to the inability to redeem, GBTC trades at a significant premium to BTC. Converting the trust fund to a spot ETF could potentially alter this situation, making it easier for funds to enter and exit the fund while potentially addressing the premium issue.

It's important to note that in this legal case, Grayscale challenged the SEC's insufficient reasoning for rejecting its application to convert into a BTC spot ETF. As a result, the SEC will need to reevaluate and reconsider Grayscale's proposal. While this victory is likely to boost market sentiment, it's crucial to understand that it doesn't guarantee a 100% approval for a BTC spot ETF.