US federal appeals court has ruled in favor of Grayscale Investments, allowing them to pursue the creation of an exchange-traded fund (ETF) based on Bitcoin, despite facing objections from the US Securities and Exchange Commission (SEC).
This court decision effectively overturns the SEC’s previous rejection of Grayscale’s proposal to convert its trust into an ETF.
The court’s decision sends the matter back to the SEC, and it reinforces the court’s August ruling that criticized the SEC’s rejection as “arbitrary and capricious.”
The court found fault with the SEC’s inability to provide a clear rationale for permitting similar products while objecting to Grayscale’s proposal. The central concern raised by the SEC was the perceived lack of adequate fraud oversight in a Bitcoin-based ETF.
Grayscale’s spokesperson, Jennifer Rosenthal, expressed her team’s eagerness to work collaboratively with the SEC to transition Grayscale Bitcoin Trust (GBTC) into an ETF. She emphasized that GBTC is fully prepared for this transition and that they intend to proceed expeditiously for the benefit of their investors.
The court’s decision has generated significant interest in the potential implications of an approved Bitcoin ETF.
This development is considered a pivotal moment for advocates of digital assets as it could pave the way for broader access, potentially driving mainstream acceptance of a sector often seen as less regulated and speculative.
Notably, recent industry challenges, including scandals and bankruptcies, have significantly reduced the estimated value of the sector since late 2021, with the overall value currently hovering around $1 trillion, with Bitcoin accounting for approximately half of this value.
Despite these developments, there are still uncertainties regarding the likelihood and timing of spot ETF approvals. While ETFs based on Ether futures were introduced in the US in October, they did not gain significant traction, which has raised questions about the broader adoption of cryptocurrencies. Notably, ETFs based on Bitcoin futures received approval in 2021.