Author: Qin Jin
Grayscale wins lawsuit against US SEC.
On August 29, according to CNBC and Bloomberg reports, the Washington, D.C., court in the United States has cleared the way for the "Bitcoin Spot ETF". Grayscale may launch the first Bitcoin ETF in the United States, which is an important watershed for the encryption industry to obtain billions of dollars in funds from retail investors in traditional securities markets.
D.C. Circuit Judge RAO said, “The rejection of Grayscale’s proposal was arbitrary and capricious because the SEC failed to explain its disparate treatment of similar products. Accordingly, we grant Grayscale’s petition and vacate the order.”
On August 29, the U.S. Federal Court sided with Grayscale in a lawsuit against the U.S. SEC. The U.S. SEC had rejected the company’s application to convert the Grayscale Bitcoin Trust Fund (GBTC) into an ETF. The decision could affect BlackRock, Fidelity and other companies that want to apply for a Bitcoin ETF.
Affected by this news, BTC, ETH and other mainstream cryptocurrencies surged rapidly in a short period of time. Coinbase was listed as a custody partner company in multiple Bitcoin spot ETF applications, and its stock price rose by more than 14% on Tuesday.
As reported by BitcoinMagazine, this victory does not mean that GBTC will automatically convert into a spot Bitcoin ETF, although this victory does bring us closer to the reality of approval. The order will be vacated and returned to the SEC. Bloomberg ETF analyst James Seyffart said the SEC now has 45 days to file an appeal and submit it to an en banc hearing, which means the case will be heard by all 17 judges on the court, not just the three judges involved in today's ruling.
“The SEC neither disputes Grayscale’s evidence that the Bitcoin spot market and futures market are 99.9% correlated, nor does it suggest that market inefficiencies or other factors undermine this correlation… The SEC has no objection to the obvious relationship between spot and futures markets.” "The financial and mathematical relationships were unexplainably confused. The futures market does not meet the standards of rational decision-making," Circuit Judge RAO said. After the news broke, the price of GBTC rose by more than 19% and the price of Bitcoin rose by more than 5%.
According to public information, Grayscale Investments, which manages the world's largest cryptocurrency fund, filed a lawsuit with the SEC in June 2022 after the SEC rejected its application to convert its flagship Bitcoin fund (its stock code is GBTC) into an ETF. The company decided to launch the ProShares futures-based Bitcoin ETF after the SEC approved it in October 2021, which will be backed by Bitcoin derivatives.
The ruling faced multiple delays, but the SEC ultimately rejected the application last summer, citing Grayscale's failure to answer questions related to market manipulation and investor protection.
GBTC, which had $16 billion in assets under management as of Tuesday, is the first crypto product that investors can trade through their brokerage accounts to gain exposure to Bitcoin. It was launched in 2013, long before Canada approved a Bitcoin ETF or the United States approved a Bitcoin futures ETF.
Grayscale charges investors a 2% annual fee, a move that makes it a cash cow for parent company Digital Currency Group, led by Barry Silbert.
“This move virtually ensures they will approve BlackRock and Fidelity as well,” said CoinRoutes CEO Dave Weisberger. The platform provides algorithmic trading and comprehensive market data products for digital assets across multiple exchanges and liquidity providers. . "Grayscale may need to resubmit its application, but it will almost certainly be approved."
For more than 2 years, multiple companies have been applying for spot Bitcoin ETFs, but since 2021, so far, the SEC has rejected more than 30 proposals, with a rejection rate of 100%. But investor sentiment was boosted in June when BlackRock, the world's largest asset manager with about $9 trillion in assets under management, filed. It is reported that all 575 of BlackRock’s previous ETF applications with the SEC have been approved, and currently only the Bitcoin spot ETF remains unapproved.
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