SEC to decide on Grayscale’s spot Bitcoin ETF tomorrow
The U.S. Securities and Exchange Commission (SEC) is back at the helm of evaluating Grayscale’s spot bitcoin exchange-traded fund (ETF) application. This development follows the D.C. Circuit Court of Appeals’ decision to overturn the SEC’s initial rejection of Grayscale’s application.
The SEC now faces a pivotal decision: approve Grayscale’s proposal or find new reasons for rejection. The court labeled the SEC’s prior denial as “arbitrary and capricious,” marking a significant win for the cryptocurrency sector and crypto-based investment products.
On October 23, 2023, the court instructed the SEC to reassess the company’s prospectus. Despite having the option to contest the court’s ruling, the SEC chose not to appeal. Sources close to the matter indicated that an appeal was unlikely. In response, Grayscale updated its application with a revised S-3 submission.
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.
The SEC has a meeting scheduled for November 2 to discuss various topics, including settlement claims and enforcement proceedings. According to the agenda on the regulator’s website, the meeting will be attended by Commissioners and other key officials. Scott Johnsson, a finance lawyer, noted that this is the first closed meeting of commissioners since the deadline for the SEC’s appeal in the Grayscale case passed. He cautioned that there is no certainty of any announcement regarding Grayscale’s application at this meeting.
Opinions are divided on the SEC’s next steps towards crypto-based ETF proposals. Some view the regulator’s decision not to appeal in the Grayscale case as a positive sign. In contrast, others remain skeptical, hinting that SEC Chair Gary Gensler might have unforeseen plans.
In the meantime, the cryptocurrency community is keenly watching to see if the SEC will address Grayscale’s application independently or make a collective decision on all pending spot Bitcoin ETF applications.