Grayscale Investments Wins Appeal For Bitcoin ETF Review Against US SEC
In the latest news report, the United States Court of Appeals has reportedly favored Grayscale Investments in the appeal the crypto firm lodged against the United States Securities and Exchanges Commission for the review of the Bitcoin ETF case.
According to the report, in 2022, Grayscale Investments attempted to convert its Bitcoin Trust (GBTC) to an ETF, however, the US SEC opposed the action, forbidding the crypto-based assets manager from executing its plans. However, the firm filed for an appeal at the DC Circuit Court of Appeals in June 2022 against the regulators, for the case to be reviewed.
In the lawsuit, the firm claimed that the SEC allowed ETFs to be invested in bitcoin futures deals, however, the commission refused to allow ETFs to invest in proposed projects that can directly store bitcoin, remarking that the agency’s decision was capricious and arbitrary.
Furthermore, on Tuesday, 29 August 2023, the United States Court of Appeal finally gave its verdict as a three-judge panel favored Grayscale Investments, granting it victory in the yearlong lawsuit against the SEC. Hence, the crypto firm now has the approval to have its GBTC conversion to ETF plan reviewed in a court hearing.
Bitcoin Price Surge After Grayscale Victory
According to the report, the court judgment not only authorized the SEC to review the crypto asset manager firm’s application but also asked the commission to withdraw all its former assertions and orders concerning the case. In other words, the SEC is mandated to review Grayscale’s application concerning its ETF conversion which it initially denied.
Michael Sonnenshein, the CEO of Grayscale, tweeted on Tuesday that the legal team representing the firm is currently reviewing the court’s verdict. He added that the judgment marks a huge progress for investors in America, the Bitcoin community, and all crypto enthusiasts who had been looking forward to securely and indirectly exploring the use cases of Bitcoin through the ETF wrapper protocol.
He added that the firm is looking forward to cooperating with the SEC to take the next step after the commission has reviewed the application. Meanwhile, the price of BTC surged sharply as soon as the news surfaced, rising from $26,100 to trade above the $27,000 price level, according to TradingView price charts.
In addition, Tuesday’s court verdict provided solid support for the popular notion that Grayscale Investment would most likely win the case against the SEC. Donald Verrilli, the legal strategist at Grayscale, stated in March during an oral debate on the case that the BTC spot market and the BTC futures markets have about 99.9% price correlation.
Grayscale Investment Awaits The SEC To Review Its Application
Notably, the filing on Tuesday seemingly backed the statement made by the strategist as the court highlighted that the commission did not oppose the crypto firm’s claims and proof that futures and spot markets for BTC have 99.9% price similarities. It also pointed out that the SEC did not propose that market inefficiency or other factors can alter the price correlation assertions.
Instead, the court filing revealed that the regulator failed to explain the discounting of the clear statistical and financial connection between futures and spot markets and hence did not meet the standards needed to make a reasoned decision.
A lawyer representing the United States Securities and Exchange Commission, Emily Parise, asserted that the common links between the two markets is a vital empirical question that the agency cannot answer.
Judge Naomi Rao of the DC Court of Appeals questioned the SEC legal representative on why the SEC claimed the assertions of Grayscale on the correlations between spot market price and futures market price were wrong without giving any explanation, during the March oral hearing
According to reports, some crypto analysts predicted that Grayscale Investments had a 70% probability of winning the case against the SEC. Meanwhile, even though the firm has won the appeal for review, its next action is clouded. Nonetheless, some speculators stated that if the court overruled the SEC rejection for insufficient reasoning, the commission would deny the GBTC conversion for another reason.
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