Court set to decide on Grayscale Bitcoin ETF by Friday

abdelaziz Fathi

Crypto asset manager Grayscale Investments might be on the cusp of receiving a verdict on its legal battle to overturn the SEC’s rejection of its application to convert its Bitcoin trust into a spot exchange-traded fund. The ruling could potentially be announced before the week concludes.


Anticipation is building around the imminent decision by the U.S. Court of Appeals for the D.C. Circuit. This decision will determine whether the SEC’s reasoning in rejecting Grayscale’s request to convert its $18.3 billion Bitcoin Trust (GBTC) into an ETF was sound. The crypto hedge fund told the court overseeing its lawsuit that nothing justifies the agency’s arbitrary disapproval of the proposed spot-bitcoin ETP.

During a March hearing, the judges overseeing the case were skeptical about why the SEC treated applications for Bitcoin futures ETFs differently from those for spot Bitcoin. Replying to a brief filed by the SEC, Grayscale said that denying a proposal for a different spot bitcoin exchange-traded product is “illogical.”

While it’s improbable that the judges will directly instruct the SEC to approve such funds, a victory for Grayscale could prompt the agency to seek other grounds for denying the applications. In an extreme scenario, the SEC might even consider reversing its approval of Bitcoin futures ETFs.

Scott Johnsson, a general partner at Van Buren Capital, highlighted in tweet a trend within United States District Courts. He noted that during August, law clerks typically transition out, resulting in judges striving to clear their dockets “before the new guard arrives.” He drew attention to the fact that, historically, 30 out of 32 cases from March 2021 and 2022 were addressed within 160 days of oral testimony, aligning with the August timeframe.

It has been 160 days since Grayscale presented its oral arguments in its lawsuit against the United States Securities and Exchange Commission (SEC) on March 7.

Grayscale CEO Michael Sonnenshein said earlier that he anticipates that the court may decide on the matter by the third quarter.

Although Sonnenshein did not comment on whether he anticipates a favorable ruling, he said Grayscale will seek to appeal the decision up the Supreme Court if the case is unsuccessful. And if that also fails, the firm will discuss the possibility of getting relief from tender offer rules with the SEC. On the other hand, Grayscale plans to work closely with the SEC to expedite the conversion process if the decision comes in their favor.

According to the attorney representing Grayscale, the SEC is using evidence and reasoning from the VanEck order, which is not part of the official record, in an attempt to justify its denial. This is known as “post hoc” reasoning, Verrilli said in a letter addressing the SEC’s recent order regarding the VanEck Bitcoin Trust.

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