Author | BEN STRACK, Blockworks
Translation | Wu Shuo Blockchain
Original article link:
https://blockworks.co/news/sec-appeal-grayscale-ruling
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The deadline for the U.S. Securities and Exchange Commission (SEC) to appeal the ruling in favor of Grayscale Investments is only one week away, and the agency’s decision may foreshadow the fate of a spot Bitcoin ETF – at least in terms of the potential release schedule.
While some industry observers have suggested that the SEC’s appeal could be detrimental to the approval timeline of a Bitcoin ETF, many expect that the SEC will not file an appeal. Regardless of the SEC’s choice, some industry observers believe that a Bitcoin ETF will ultimately be listed for trading.
SEC’s Choice
In August, a judge in the U.S. Court of Appeals for the District of Columbia ruled that the SEC’s refusal to approve Grayscale’s Bitcoin Trust to convert into an ETF but approving a Bitcoin futures ETF was “arbitrary and capricious”.
A spokesperson for the SEC told Blockworks that the agency is “reviewing the court’s decision to determine the next steps”. Grayscale Investments, in a statement following the decision, said it will “work closely with the SEC to determine the next steps in bringing GBTC to NYSE Arca as a spot Bitcoin ETF”.
The deadline for the SEC to challenge this decision is October 13th. It could seek to appeal to the U.S. Supreme Court – if granted a Certiorari – or it could request an “en banc” review of the ruling by the full panel of judges of the appeals court.
Executives at LianGuaintera Capital said in their September letter to investors last month that the Supreme Court route is unlikely, noting that “from a legal standpoint, this case is not that important”.
If the SEC chooses not to appeal, it is expected that the court will issue an order detailing the next steps. According to a blog post by Winston & Strawn law firm, this could include “directing the SEC to approve the application or reevaluate Grayscale’s application, in which case the SEC can still reject the proposal on other grounds”.
Analysts Chase White and Joe Flynn of ComLianGuaiss Point Research & Trading said in their research report last Friday that the likelihood of obtaining a full hearing or Certiorari is “virtually zero”.
“We believe Gensler (SEC Chairman) knows this, and we wouldn’t be surprised if the agency chooses not to appeal,” they added.
However, even if the SEC chooses not to appeal, it could still seek to “obstruct”, said White and Flynn.
“The SEC can still reject the conversion for different reasons, which makes the urgency for an appeal less pressing than in the Ripple case, where the judge’s decision was clear and had a significant impact on the legal classification of cryptocurrencies,” said Matteo Greco, an analyst at Fineqia International, to Blockworks.
A spokesperson for the SEC declined to comment on Friday.
Is it just a matter of time, not whether it will be launched?
Hashdex CIO Sam Kerbage said in a webinar last month that it is “the most likely path” for the SEC to ask Grayscale to submit a new proposal and reject it again for different reasons.
Kerbage pointed out that resubmitting a proposal would start a 240-day review period.
The 240-day window for Ark Invest’s Spot Bitcoin ETF will expire on January 10. For other proposals such as BlackRock and Fidelity’s, the final decision deadline is approximately two months later.
“The general view is that if this round of spot BTC ETF applications is approved, it is most likely to happen on or before January 10, because if it is rejected in January and approved in March, it will appear inconsistent,” said Alex Thorn, Head of Research at Galaxy Digital, in a statement.
Greco said that the January time frame does indeed mean “comprehensive approval or irrevocable rejection.”
“Rejection will undoubtedly have short-term negative effects, especially as traders can take advantage of the resulting market uncertainty and volatility for speculative long and short trades,” Greco explained. “On the other hand, approval will generate positive market reactions, signaling the potential influx of a large amount of traditional financial capital.”
Regardless of what happens in January, many agree that a spot Bitcoin ETF will eventually be traded in the United States.
Bloomberg Intelligence analysts said after Grayscale’s decision that they believe there is a 75% chance that the SEC will approve a spot Bitcoin ETF by the end of 2023. By the end of 2024, the probability of approval is 95%.
“Although our base case remains that the SEC will begin approving ETFs in early 2024, we acknowledge this is on a razor’s edge given Gensler’s continued anti-crypto stance,” White and Flynn wrote in their report on Friday. “However, we believe that considering our view that the SEC has almost no chance of winning in court once everything is said and done, it is almost certain that a spot BTC ETF will be approved within the next two years.”
Despite the uncertainty about the SEC’s next move, Joel Kruger, market strategist at LMAX Group, believes that cryptocurrencies have a trend advantage.
“We believe the bigger message here is a continued narrative that is pushing cryptocurrencies in a favorable direction,” Kruger told Blockworks. “In recent months, there has been increasing acceptance and understanding of the value proposition of crypto assets by the public and lawmakers.”
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