Grayscale wins the court battle, but what does this mean for a spot Bitcoin ETF?

A federal judge has overturned the United States Securities and Exchange Commission’s decision to deny an exchange-traded fund (ETF) offering from Grayscale Investments through its Bitcoin (BTC) Trust, but many experts have pointed out the court ruling will not automatically lead to the first spot BTC ETF in the country.
In an Aug. 29 decision with the U.S. Court of Appeals for the District of Columbia Circuit, Judge Neomi Rao supported Grayscale’s position that its proposed Bitcoin ETF was “materially similar” to Bitcoin futures exchange-traded products already approved by the SEC for trading. The court largely ruled that the SEC’s justification of denying Grayscale’s Bitcoin ETF on the grounds it was not “designed to prevent fraudulent and manipulative acts and practices” was insufficient, and the matter will return to the commission for review.
THIS JUST IN: The D.C. Circuit ruled 3-0 in favor of Grayscale and $GBTC. This is a monumental step forward for all who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper. Read the decision: https://t.co/ulAtcsad2G pic.twitter.com/BNZABvM7tw
— Grayscale (@Grayscale) August 29, 2023
To date, the SEC has denied all spot crypto ETF offerings in the U.S., though many applications are currently being reviewed, including those from BlackRock, ARK Invest, Bitwise Asset Management, VanEck, WisdomTree, Invesco and Galaxy Digital, Fidelity and Valkyrie. The commission has the means to keep delaying a decision or otherwise pushing the final deadline for approval on the majority of the aforementioned applications until March 2024.
At the time of publication, the SEC had not publicly commented on the appeals court decision but reportedly said it would be reviewing the case to determine its next steps. The commission will likely have the opportunity to appeal the decision, but many experts have claimed that the initial Grayscale victory could pave the way for eventual approval.
“Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the U.S.,” said Tim Bevan, CEO at ETC Group. “We don’t believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1 ’24.”
Lolli CEO and co-founder Alex Adelman said the appeals court ruling would “put new pressure on the SEC” in its justification for rejecting spot Bitcoin ETF applications. He added the BTC price rally following the news could be interpreted as a “vote of confidence” for spot investment vehicles linked to Bitcoin:
“Now is the time for the U.S. to embrace innovation by making bitcoin available to investors through exchange-based products or risk falling behind global powers that are moving faster to claim this advantage.”
A spokesperson for the Crypto Council for Innovation (CCI) told Cointelegraph the ruling opened the door to a wider range of investors looking to offer a spot BTC vehicle in the United States. According to the CCI, “spot bitcoins ETFs are now closer to a potential launch.”
Some have asked whether they could revoke the bitcoin futures ETFs, highly unlikely in our view, esp given their recent openness to Ether futures ETFs. In the end, I know it and you know it and even animals know it- the best move is to just approve the damn things already. https://t.co/fZCOIur4of
— Eric Balchunas (@EricBalchunas) August 29, 2023
The next steps for either Grayscale moving forward with its application or the SEC appealing the decision are unclear. The asset manager could refile with the SEC aimed at making the spot investment vehicle application more like that of a Bitcoin futures-linked ETF. Experts are reporting the SEC also has the option of filing for an ‘en banc’ hearing in which all judges on the DC circuit — rather than the three which ruled on the Grayscale appeal — would hear the matter.