On Tuesday, August 29, the leading asset manager in Stamford Grayscale Investments emerged as a winner against the U.S. Securities and Exchange Commission (SEC) in the Bitcoin ETF case. In the ruling, the Federal court instructed the SEC to review a submission made by Grayscale to convert its Grayscale Bitcoin Trust (GBTC) into Bitcoin exchange-traded funds (ETF).
Earlier, the SEC had rejected the Grayscale proposal of converting the GBTC to Bitcoin ETF. The market regulators argued that the GBTC was unsuitable to address fraud and market manipulation.
Grayscale Wins over SEC
The SEC decision compelled Grayscale, led by the head of the legal team, Donald B. Verrilli Jr., to appeal the matter in the U.S. Court of Appeals Circuit in Colombia. After the petition, Grayscale chief executive Michael Sonnenshein expressed disappointment at the SEC’s decision to reject the application.
At that time, the Grayscale Bitcoin Trust offering was ranked the largest Bitcoin ETF with over $14 billion in assets under management.
In a review of the court judgment summary, Judge Neomi Rao blamed the SEC for failing to explain how spot market investment and futures are treated. Judge Rao argued that the SEC failed to demonstrate how the Grayscale Bitcoin ETF proposal was not “materially similar” to future offerings approved by the market regulators.”
The court noted that the Grayscale Bitcoin ETF had similar characteristics to the Futures. Judge Rao argued that despite the similarities, the SEC rejected Grayscale’s proposal and approved the Bitcoin Futures application submitted by the two companies.
In her address, Judge Rao stated that the Future prices correspond to those in the spot markets. During a previous presentation, the judge argued that the SEC failed to persuade the panel that the spot market could be unsafe for investors.
Will the SEC Appeal the Case?
Referring to the slate of Bitcoin investment applications submitted to the SEC, the court blamed the market regulators for rejecting all. The court recognized the efforts made by asset managers such as BlackRock, Valkyrie, Fidelity, and Invesco, among others, to expand the Bitcoin investment offering.
The report demonstrated that Grayscale was among the companies rejected by the SEC to offer the ETF. In 2021, the SEC explained that Grayscale’s request to convert its GBTC to an ETF lacked sufficient preventive measures to address market manipulation.
In an X post ( formerly Twitter), the CEO of Grayscale stated that the company’s legal team would review the court ruling.
Meanwhile, the Grayscale and SEC are given 45 days to appeal the court ruling to the U.S. Supreme Court. Upon reaching the SEC, the market regulator did not clarify whether it would appeal.
However, guided by the existing law, the court will outline how the final ruling will be implemented if the SEC fails to appeal. Either the court will order the listing of Grayscale Bitcoin ETF or request the asset manager to review its application.