On Tuesday, the US Court of Appeals issued an opinion in which a judge ordered that the denial of the application for a Bitcoin ETF by Grayscale submitted to the SEC be reviewed.
This decision is a major turning point for the broader crypto community. A number of Bitcoin ETFs have been turned down by the Securities and Exchange Commission (SEC) for far.
These ETFs are meant to provide investors exposure to Bitcoin without actually having to hold the token, but the regulator has cited market manipulation concerns as a reason to reject applications.
The court
According to the court, the SEC had not been able to provide a coherent reason for the denial of the Bitcoin ETF application.
The opinion said that the Commission was not able to give an adequate application for approving two Bitcoin Futures ETPs, but not the Bitcoin ETP proposed by Grayscale.
It said that since there was no coherent explanation available, the different regulatory treatment of similar products was just unlawful.
The decision was positively received by Grayscale, which said that this development would be a huge one for investors.
Grayscale
According to a spokesperson of the company, this decision was a major step forward for investors in the US, the Bitcoin ecosystem, and everyone who wanted exposure to Bitcoin with the protections of ETF.
They also added that the legal advisors and team were going over the details of the Court’s opinion and would then take the necessary steps with the SEC.
A spot Bitcoin ETF is considered a possible gateway for Bitcoin to achieve mainstream institutional adoption in crypto circles.
Investors would be able to use it to gain Bitcoin exposure via a traditional stock exchange and hold the token in a brokerage account.
The impact
After the release of the court’s decision, there was a 5% rally recorded in the price of Bitcoin within an hour that saw it reach $27,300.
According to data from CoinGecko, the same time period saw a widespread rise in the broader crypto market, with coins like XRP and Ethereum recording gains of about 4%.
There is a deadline of 45 days available to both Grayscale and the SEC to appeal the court decision announced on Tuesday.
If there is an appeal, then there might be an en banc panel review, which would involve a rehearing attended by all of the court’s judges, or the case could also be sent to the Supreme Court.
The Yale Journal of Regulation said that the former option is used rarely, as it needs the approval of a majority of court judges.
The lawsuit had been filed against the SEC by Grayscale last year in June. It happened after the former turned down its application of converting its Bitcoin fund into an ETF.
The Grayscale Bitcoin Trust (GBTC) currently holds about $16.2 billion. Due to the structure of the offering, the shares of the trust are trading at a discount.
The court had issues with the SEC’s explanation that manipulation and fraud concerns are different in futures and spot markets.