A recent court decision has brought the first bitcoin spot ETF closer to becoming a reality. In a case involving Grayscale and the U.S. Securities and Exchange Commission (SEC), the Court of Appeals in Washington, D.C. ruled in favor of Grayscale.
They found that the SEC didn’t provide enough justification for blocking Grayscale’s plan to turn its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF) for listing on NYSE Arca.
What Was Grayscale’s Legal Battle with the SEC About Regarding Their Bitcoin ETF?
Grayscale made headlines when it filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in October 2022. The basis for this legal action was the SEC’s rejection of Grayscale’s application to launch a spot bitcoin exchange-traded fund (ETF).
While the SEC had previously given the green light to several bitcoin ETFs tied to futures contracts, the launch of a spot bitcoin ETF remained elusive in the United States.
Notably, there have been numerous spot bitcoin ETF proposals rejected by the SEC over the years, with the agency often citing concerns about market manipulation and surveillance.
Grayscale’s argument in its lawsuit centered on the notion that a spot bitcoin ETF would not introduce significantly different risks compared to the futures-backed bitcoin ETFs that had already received SEC approval.
They pointed to the remarkable 99.9% correlation between the spot and futures markets for bitcoin as evidence that the two were closely intertwined. This correlation, Grayscale argued, suggested that the spot market was robust and efficient, making it no more susceptible to manipulation or surveillance concerns than the futures market.
In essence, Grayscale contended that the SEC’s rejection lacked sufficient justification given this high correlation between the two markets. The recent court ruling in favor of Grayscale essentially upheld this argument, highlighting the SEC’s inability to challenge this correlation or present evidence to the contrary.
How Would the Market React to the Introduction of a Spot Bitcoin ETF?
The SEC has been against a Bitcoin spot ETF for a long time, saying that there is too much risk of theft and market abuse.
The decision on Tuesday does not mean that an application for a spot bitcoin ETF will be approved soon. Instead, the SEC will have to look at Grayscale’s application again and, if it is denied again, give a better reason.
The release of a spot bitcoin ETF has been thought to be good for the price of bitcoin for a long time. This is because some pension funds and other big financial players have tight rules about what they can do with their customers’ money.
Also, a spot Bitcoin ETF could be seen as a legal and reputational stamp of approval for Bitcoin, which could lead to normal financial institutions and investors being more open to cryptocurrency.
In answer to the court’s decision in the case between Grayscale and the SEC over a bitcoin ETF, the price of bitcoin went up by more than 6%. Stay tuned with Crossover99 for more Crypto Related Updates and News.
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