SEC Opts Not to Appeal Bitcoin ETF Court Loss Against Grayscale, Paving the Way for Potential Approval

The U.S. Securities and Exchange Commission (SEC) has reportedly decided not to appeal a court's significant reversal of its previous decision to prevent Grayscale from converting its Bitcoin trust into a more user-friendly exchange-traded fund (ETF). This move, as reported by Reuters, potentially clears the path for the first Bitcoin ETF in the United States.

Court's Reversal and the SEC's Decision

In August, the D.C. Circuit Court of Appeals ruled that the SEC's rejection of Grayscale Investment's application to transform the Grayscale Bitcoin Trust (GBTC) into an ETF was unjust and arbitrary, mandating a review of the decision. The court's decision emphasized the requirement for federal agencies to treat similar cases consistently.

SEC had until midnight on a particular Friday to challenge the court's ruling, but the Reuters report suggests the SEC has chosen not to appeal, allowing the deadline to pass.

Bitcoin's Response to the News

In response to this news, the price of Bitcoin (BTC) surged above $27,000, reflecting the market's optimism about the potential for a Bitcoin ETF in the United States.

Grayscale's Longstanding Pursuit

Grayscale initially applied to convert its closed-end fund into an ETF in October 2021. GBTC stands as the largest cryptocurrency fund globally and has been trading at a discount to its Bitcoin holdings since February 2021. This discount, which reached nearly 50% at one point, has since receded to approximately 17%.

Grayscale has consistently advocated that converting GBTC into an ETF would eliminate the discount by bridging the gap between the fund's price and its underlying Bitcoin. ETFs employ a creation-redemption model, enabling the creation of new ETF shares to meet demand or the redemption of shares to reduce supply.

Uncertain Next Steps

While the SEC's decision not to appeal this court loss is a significant development, it remains uncertain how the SEC will proceed with Grayscale's ETF application. The agency still retains the authority to deny it for reasons other than those overturned by the court, although Grayscale could potentially challenge any such denials in court.

Notably, Grayscale, a subsidiary of Digital Currency Group, is among several entities that have applied for Bitcoin spot ETFs. Approval from the SEC is still pending for entities such as BlackRock and Fidelity, among others.

Disclaimer: The information presented in this report is based on the provided source material and should not be considered as financial advice. Cryptocurrency investments carry risks, and it's essential to conduct thorough research before engaging in such investments.