Grayscale Asset Management has won an important court ruling over US regulators in its bid to launch an exchange traded fund that tracks the price of bitcoin, the flagship cryptocurrency token.
A federal appeals court in Washington DC decided on Tuesday that the Securities and Exchange Commission was wrong to reject Grayscale’s application for converting its flagship vehicle, Grayscale Bitcoin Trust, into an ETF.
Gary Gensler’s SEC chairmanship is under pressure after the decision. Gensler has launched an enforcement blitz this year against players in the crypto industry. The SEC is pursuing cases against Coinbase, a Nasdaq listed crypto exchange, as well as Binance – the largest crypto exchange on the planet.
After the ruling, bitcoin’s price jumped by approximately 6 percent. The price of bitcoin is up by 65 percent year-to-date. Coinbase shares are up by more than 13 percent.
The Grayscale suit was primarily focused on whether money managers would be able to offer a bitcoin spot ETF, which would expose retail investors directly to the price of bitcoin in real time. The SEC previously approved ETFs that are based on Bitcoin futures. However, it has stated that the bitcoin market is unregulated and susceptible to manipulation.
The SEC’s decision blocking the spot ETF was rescinded by a three-judge district court of appeals panel led by Judge Neomi Rao.
The SEC stated that it is reviewing the decision of the court. The SEC could appeal the decision to the Supreme Court or to the entire federal appeals court, but it’s not clear if it will.
Despite the SEC’s strict stance, the demand for a bitcoin ETF spot has increased, and traditional players are now trying to enter the market. The SEC has received half a dozen other proposals from BlackRock WisdomTree Fidelity and others to launch spot Bitcoin ETFs.
Jeremy Senderowicz, a lawyer at Vedder Price, said that the court’s ruling is a “near-fatal blow” to the SEC decision to not allow the products to be launched. If this ruling stands, it will invalidate the SEC’s main basis for denying every bitcoin spot ETF in the past several years.
Grayscale spokesperson Jennifer Rosenthal stated that “this is a major step forward for American Investors, the Bitcoin ecosystem, and those who have advocated for bitcoin exposure via the added protections provided by the ETF Wrapper.”