March 23, 2023

Grayscale and the Securities and Exchange Commission (SEC) have presented their first oral arguments in court regarding the approval or denial of a Bitcoin spot ETF product in the United States. The hearing took place before the United States Court of Appeals for the DC Circuit, where judges pressed the SEC on its justification for approving multiple Bitcoin Futures ETFs while denying an equivalent spot ETF.

The SEC maintained the same argument it used when denying Grayscale’s spot ETF application in the first place: that Bitcoin Futures ETFs provide better protection against market manipulation than spot ETFs. The SEC’s lawyer argued that “the commission’s order should be upheld because it was the product of reasonable decision making [and] reasonably distinguished prior approval of different products.”

Grayscale, on the other hand, argued that the SEC’s reasoning was flawed and that the approval of Bitcoin Futures ETFs did not necessarily mean that spot ETFs were less secure. Grayscale’s lawyer argued that “the SEC’s decision was arbitrary and capricious, and that the commission failed to provide a reasoned explanation for its decision.”

The outcome of this case could have significant implications for the cryptocurrency industry, as a Bitcoin spot ETF would make it easier for retail investors to gain exposure to Bitcoin. Currently, the only way for retail investors to invest in Bitcoin is through trusts like Grayscale’s Bitcoin Trust, which charges a premium and is only available to accredited investors.

The judges did not indicate when they would issue a ruling on the case, but the decision is expected to have a significant impact on the future of Bitcoin ETFs in the United States.

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