Bitcoin ETF application from Grayscale Investments will go uncontested by the SEC, following an internal source’s revelation that the U.S. Securities and Exchange Commission will not appeal a court ruling which found its initial rejection of the application to be in error.
In August, the D.C. Circuit Court of Appeals declared the SEC’s dismissal of Grayscale’s request to convert the Grayscale Bitcoin Trust (GBTC) into an ETF as “arbitrary and capricious,” urging a reevaluation. The court emphasized the need for consistent treatment of similar cases by federal agencies.
Circuit Judge Neomi Rao stated in August, “The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund.”
The SEC’s decision not to appeal is expected to pave the way for a reassessment of Grayscale’s application.
A spot Bitcoin ETF would provide investors with exposure to the leading cryptocurrency without direct ownership. The SEC has consistently rejected spot Bitcoin ETF applications, citing concerns about the ability to protect investors from market manipulation.
Grayscale initially sought approval to convert its closed-end fund into an ETF in October 2021. The Grayscale Bitcoin Trust (GBTC), the world’s largest cryptocurrency fund, has been trading at a discount to its bitcoin holdings since February 2021, with the discount reaching nearly 50% at one point, now standing at approximately 17%.
Grayscale contends that transforming GBTC into an ETF would eliminate the discount by narrowing the gap between the fund’s price and its underlying bitcoin value, leveraging the creation-redemption model of ETFs.
Other asset management firms like BlackRock (BLK.N), Fidelity, and Invesco have similar spot Bitcoin ETF applications awaiting SEC review, with decisions expected no later than next year.
