Original Title: Grayscale Beats the SEC
Original Author: Jack Inabinet
Original Source: bankless
Translation: Kate, Marsbit
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After years of being bullied by regulatory agencies, today, the appellate court has won a victory in the lawsuit against the U.S. Securities and Exchange Commission (SEC), and Grayscale has finally achieved victory. Today, we will analyze the ruling and point out what will happen next!
— Bankless Team
Grayscale has just won a major legal victory against the SEC, giving the entire cryptocurrency industry a reason to celebrate.
In a decisive ruling, Judge Neomi Rao of the Washington D.C. Circuit Court of Appeals ordered the SEC to reverse its rejection of Grayscale’s application to convert its trust-based BTC product into an exchange-traded fund (ETF).
Under the current trust plan of GBTC, shares can only be created and not redeemed, which means there is no market mechanism to force the market value of shares to follow its net asset value (NAV). However, converting the Grayscale Bitcoin Trust into an ETF will allow GBTC to redeem the underlying bitcoins, and the existence of this arbitrage opportunity will eliminate the discount on the asset’s net value.
The approval of a Bitcoin spot ETF is seen as good news for the cryptocurrency industry, as it will allow investors to bypass the challenges of cryptocurrency custody and quickly become the preferred investment tool for U.S. retail and institutional investors seeking to invest in the asset. You no longer need to choose between heavy self-custody and potentially insecure CEX. Instead, outsource your concerns to TradFi in exchange for a low-cost Bitcoin investment tool that comes with additional features such as leverage and options.
As the market optimistically anticipates the approval of ETF, the price of Bitcoin has risen by more than 8%, and the discount of Bitcoin’s market value to its net asset value has reached levels unseen since the end of the bull market in 2021!
Source: TradingView
Judge Rao pointed out in the ruling that the SEC failed to comply with the basic administrative law principles requiring federal agencies to treat similar cases equally, and the SEC failed to explain why it treated Grayscale differently. Specifically, the court found that Grayscale’s spot BTC ETF would be sufficiently similar to two approved BTC futures ETFs and should therefore receive similar regulatory treatment.
The reason behind this decision is that the Bitcoin spot market and the futures market are closely related, and the court recognizes that the GBTC ETF shares the same regulatory sharing agreement as the futures products.
Data source: U.S. Court of Appeals, D.C. Circuit Court
Although the SEC has been thoroughly defeated by Grayscale and can no longer deny the company’s ETF on the grounds of fraud and manipulation, the battle for the spot BTC ETF is not over! The court did not grant the application outright, but instead ordered the SEC to review Grayscale’s proposal again.
Given the hostility shown by the U.S. Securities and Exchange Commission (SEC) towards cryptocurrencies, it is regrettable that the agency may choose a new reason to reject Grayscale’s proposal, thereby forcing further costly litigation. However, Jake Chervinsky, a top cryptocurrency legal expert and Chief Policy Officer of the Blockchain Association, provides a more optimistic view.
Although Chervinsky did not provide a final timetable, he is confident in the eventual approval of a Bitcoin spot ETF. The SEC’s failure can serve as a convenient excuse for the agency to exit a losing battle and gracefully unwind its long-held anti-Bitcoin spot ETF position.
The giants of TradFi have been queuing for a Bitcoin spot ETF for over a month, and it is likely that they have exerted tremendous pressure on their relationships with the SEC to approve one! The preliminary rulings for five spot ETFs will be announced on Friday…
Here, we hope to see another bullish surprise in just a few days
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