- The SEC has decided not to appeal its court loss against Grayscale regarding the conversion of its Bitcoin trust into an ETF.
- The court had previously ruled that the SEC’s denial of Grayscale’s ETF application was arbitrary and capricious.
- While the SEC’s decision increases the likelihood of the first Bitcoin ETF in the US, the next steps and potential approval still remain uncertain.
The U.S. Securities and Exchange Commission (SEC) has reportedly decided not to appeal its court loss in the case against Grayscale, increasing the likelihood of the Grayscale Bitcoin Trust (GBTC) being converted into a Bitcoin exchange-traded fund (ETF). This development has already had a positive impact on the price of Bitcoin.
SEC Opts Against Appealing Court’s Decision
According to sources familiar with the matter, the SEC has chosen not to appeal the court’s scathing reversal of its previous decision to reject Grayscale’s application for turning its Bitcoin trust into an ETF. This decision paves the way for the potential launch of the first Bitcoin ETF in the United States.
Court Ruling Invalidates SEC’s Denial
In August, the D.C. Circuit Court of Appeals ruled that the SEC’s denial of Grayscale’s ETF application was “arbitrary and capricious.” The court criticized the SEC’s handling of the case and stated that federal agencies should treat similar cases consistently. This ruling prompted a reevaluation of the SEC’s stance on Grayscale’s application.
Uncertainty Surrounding Next Steps
While the SEC has chosen not to appeal the court’s decision, it remains unclear how the regulatory agency will proceed with Grayscale’s application. Although the court invalidated the previous denial, the SEC still has the authority to reject the application for other reasons. Grayscale may choose to challenge any further denials in court.
Potential Benefits of Conversion to ETF
Grayscale, a subsidiary of Digital Currency Group, has long advocated for the conversion of GBTC into an ETF. The conversion could eliminate the persistent discount at which GBTC has been trading compared to its Bitcoin holdings. An ETF structure enables the creation and redemption of shares, aligning the price more closely with the underlying asset.
Impact on the Market and Other Applicants
The news of the SEC not appealing the court’s decision has already had a positive effect on Bitcoin’s price, with BTC shooting above $27,000 following the announcement. Grayscale is not the only entity seeking approval for a Bitcoin ETF, as other companies like BlackRock and Fidelity are also awaiting the SEC’s decision on their applications.