Grayscale’s Win Might Force SEC To Approve Spot Bitcoin ETF: JPMorgan

JPMorgan remarked on the recent court verdict, which gives Grayscale Investment victory over its lawsuit case against the SEC, stating that the judgment is likely to force the commission to grant the spot Bitcoin exchange-traded fund (ETF) applications from cryptocurrency firms, according to the report.

In the report, JPMorgan asserted that the United States Securities and Exchange Commission would likely be forced into a tight spot by the recent Grayscale, leaving it with no choice but to endorse the numerous BTC ETFs spot trading applications from different crypto platforms.

According to the report, in 2022, Grayscale Investment submitted a proposal to the SEC requesting permission to convert its BTC holdings ( Grayscale Bitcoin Trust GBTC) to ETFs. However, the SEC outrightly rejected the proposal, forbidding the firm from such action. In addition, the report showed that the SEC had previously approved futures-based bitcoin ETFs, using the approval as a basis to deny Grayscale Investment’s application to convert its bitcoin holdings to exchange-traded funds

In response, the crypto firm filed for an appeal on the case with a US Federal court last year. However, the final verdict surfaced last week when the court ordered the SEC to review its decision to reject Grayscale’s proposal on GBTC to ETF conversion.

During the hearing, the court stated that the commission had no justification to deny spot bitcoin ETFs while endorsing futures bitcoin ETFs because both spot and futures expose investors to similar risks as the two have correlated price action.

The SEC Has To Approve Spot BTC ETFs After Grayscale Win

Hence, the court determined that the SEC’s initial judgment on the case was capricious and arbitrary as the commission failed to prove why it treated two similar products differently. Therefore, the federal court granted Grayscale investment victory by asking the regulator to review the case.

Remarking on the verdict, JPMorgan stated that Grayscale’s victory means that the SEC has no choice but to withdraw its initial judgment on the firm’s application. According to JPMorgan analyst Nikolaos Panigirtzoglou, the recent development is disruptive and embarrassing for the commission as they have no choice but to obey the court.

Furthermore, Panigirtzoglou added in his statement that it is seemingly possible for the regulator to be compelled to endorse the multiple applications for spot bitcoin ETF, which many crypto exchanges, including Grayscale, had previously submitted. However, at the time of writing, the SEC is still pending the approval of all the applications.

According to the report, many crypto companies submitted their applications several months ago, which the commission refused to endorse. However, with Grayscale’s recent victory, which many of these firms considered a beam of hope, they would likely receive a green light from the SEC concerning their Bitcoin ETF applications.

SEC Decides To Delay Approval Of Multiple ETF Applications

On Thursday, the United States Securities and Exchange Commission announced its plan to spend decisions on the spot bitcoin ETF application it had received from multiple crypto firms, including Invesco, Fidelity, BlackRock, and Grayscale, till mid-October. Meanwhile, the JPMorgan analyst suggested that the SEC probably postponed the approval of the applications in order to issue a general grant to all applications submitted at the time rather than endorsing them in order of their arrival.

He added that if his assertion were correct, the SEC’s decision would benefit investors more as the delay would allow more competition in the ETF market regarding fees. In addition, Panigurtzoglou highlighted that Grayscale will likely face more pressure to reduce its charges if the SEC approves its bitcoin trust’s conversion to the extensive bitcoin spot ETF globally.

Furthermore, the market expert pointed out that even though Grayscale’s win would facilitate spot bitcoin ETF approval, it doesn’t necessarily have much impact on the broader crypto market. He explained that the product had been in the European and Canadian crypto markets for a while but lacked significant interest from investors.

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