March 28, 2023

DC Circuit Judges Side with Grayscale in Bitcoin ETF Case Against SEC

The United States Court of Appeals for the DC Circuit heard oral arguments on Tuesday in the case of Grayscale Investments LLC’s attempt to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF). The three presiding judges appeared to side with Grayscale in their positioning, as they questioned the SEC’s lawyers on their decision to not approve the move towards a spot bitcoin ETF.

The SEC has repeatedly denied previous attempts at the introduction of a spot ETF, leading Grayscale to sue the SEC, alleging that the decisions have been arbitrary and inconsistent with the Commission’s decision to approve Bitcoin futures ETFs. In today’s arguments, Chief Judge Sri Srinivasan and Judge Neomi Rao continually questioned the SEC’s lawyers on their reasoning for denying Grayscale’s proposal.

Grayscale’s GBTC is currently the largest bitcoin investment product in the world, with over $30 billion in assets under management. The company has been pushing for a spot ETF for years, arguing that it would provide investors with a more efficient and cost-effective way to gain exposure to bitcoin.

The SEC has been hesitant to approve a spot ETF, citing concerns over market manipulation and investor protection. However, Grayscale argues that the SEC’s decision to approve Bitcoin futures ETFs undermines these concerns, as futures contracts are also subject to market manipulation.

The outcome of this case could have significant implications for the future of bitcoin ETFs in the United States. If Grayscale is successful in its lawsuit, it could pave the way for other companies to launch spot bitcoin ETFs, which could potentially drive more institutional investment into the cryptocurrency market.

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