On August 29th, 2023, after previous rejection, an appeals court held that the SEC must review Grayscale’s ETF bid. Specifically, the court noted the SEC’s decision to reject the Grayscale Bitcoin ETF application was “arbitrary and capricious” in its ruling.

As per the filings, See https://www.docdroid.net/vrehbKf/dc-cir-22-1142-01208547571-0-pdf, the court hereby ordered Grayscale’s petition for review to be granted and the SEC’s order to deny the GBTC listing application to be vacated, reasoning the SEC did not “offer any explanation” as to why Grayscale was in the wrong.

While the order does not guarantee the eventual listing of a Grayscale spot Bitcoin ETF, this is seen as a huge win for investors, signaling a hopeful round in the SEC’s game of regulation by enforcement (even if it is not determinative). In addition, now investors that are skeptical or hesitant to take their first step in investing in crypto or do not want to deal with the regulatory ambiguity in the crypto market, can, in turn, take advantage of Bitcoin ETFs, which allow such investors to pool bitcoin-related assets offered on traditional exchanges by brokerages to be traded as ETFs thus allowing them to have access without ownership (which comes with a myriad of regulatory requirements).

As of now, the SEC has denied all spot crypto ETF offerings in the U.S.. However, many applications are currently being reviewed, including those from BlackRock, ARK Invest, Bitwise Asset Management, VanEck, WisdomTree, Invesco and Galaxy Digital, Fidelity and Valkyrie. What this means is that the SEC may keep delaying a decision on the aforementioned applications until March 2024. The SEC could allow all of the issuers with spot Bitcoin ETF filings to launch at once. With this instant case, on the other hand, the SEC also has the option of appealing or filing for an ‘en banc’ hearing in which all judges on the DC circuit, as opposed to the three which ruled on the Grayscale appeal, would hear the matter. In the words of a spokesperson for the Crypto Council for Innovation (CCI)—during an interview with Cointelegraph—the ruling opened the door to a wider range of investors looking to offer a spot BTC vehicle in the United States, and “spot bitcoins ETFs are now closer to a potential launch.” See https://cointelegraph.com/news/grayscale-wins-court-battle-what-does-this-mean-for-spot-bitcoin-etf. Moving forward, Grayscale could refile with the SEC aimed at making the spot investment vehicle application more like that of a Bitcoin futures-linked ETF.

Luckily we’ll get another update this Friday, as the SEC has another deadline to respond to filings from Bitwise, BlackRock, VanEck, WisdomTree and Invesco. Let’s see if the SEC will punt yet again.