US court rules in favor of Grayscale bitcoin ETF against SEC

abdelaziz Fathi

A U.S. court has ruled that the Securities and Exchange Commission (SEC) was wrong in rejecting Grayscale’s application for a spot bitcoin exchange-traded fund (ETF). The ruling was made by a panel of judges in the District of Columbia Court of Appeals in Washington.


The court found that the SEC’s denial lacked sufficient explanation for treating bitcoin futures ETFs differently from spot bitcoin ETFs. 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.

Both parties have 45 days to appeal the decision, which could be escalated to the U.S. Supreme Court or an en banc panel review. It remains uncertain if the SEC will challenge the ruling. Despite the anticipated SEC appeal, experts believe that the arrival of spot bitcoin ETFs in the U.S. is imminent. Tim Bevan, the CEO of ETC Group, a crypto exchange-traded product provider, told Reuters that he expects applications that meet the criteria to be approved, possibly in the first quarter of 2024.

“It’s excellent that the judge in the Greyscale vs SEC case was able to see the obvious correlation between Bitcoin futures and spot price. Products like Grayscale’s holdings have converted to ETFs in other commodity markets, and it makes no sense to treat crypto differently. Rules for financial markets need to be based on data, not arbitrary and capricious sentiment toward a legitimate and growing asset class,” said Greg Moritz, Chief Operating Officer at AltTab Capital.

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.

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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