Spot ETF Victory: Crypto Court Win

Martin Walker
Sep 3, 2023 at 12:22 pm

A short while ago, the U.S. Court of Appeals for the D.C. Circuit handed down a decision in favor of Grayscale Investments, a digital asset management firm, in their legal dispute against the Securities and Exchange Commission (SEC).

The court mandated that the SEC reevaluate its refusal of Grayscale's request to transform its flagship Grayscale Bitcoin Trust fund (GBTC) into an exchange-traded fund (ETF) for Bitcoin in the spot market. This ruling stirred excitement within the crypto community, causing a surge in crypto assets like Bitcoin (BTC) and narrowing GBTC's discount to less than 20%.

In June 2022, Grayscale took legal action against the SEC after the agency rejected their application from October 2021, despite numerous delays. The SEC's rationale was that Grayscale hadn't adequately disclosed measures to prevent market manipulation, even though it had approved multiple futures ETFs of a similar nature.

Nonetheless, the court found the SEC's arguments lacking and deemed the agency's preference for futures ETFs over spot products unreasonable.

Insights from Crypto Experts

Yamina Sara Chekroun, an experienced corporate attorney and the head of Legal U.S. at Ramp, expressed in a statement  that the court's decision should be celebrated as a positive stride toward the potential approval of a spot ETF in the future, although the SEC might still consider an appeal.

Chekroun pointed out that the SEC's authority to regulate the crypto space appears to be diminishing, as evidenced by its case against Ripple Labs and XRP. Discussions surrounding whether Congress has granted the Commission the authority to regulate through enforcement are emerging and could have influenced recent court decisions.

Nevertheless, Chekroun emphasized that this ruling signifies that the crypto industry has advocates willing to safeguard access to digital asset products.

A Promising Development for Regulatory Measures

Moreover, Joonatan Lintala, CEO of the decentralized social app Phaver, remarked that the Grayscale ruling represents a "promising development" for regulations aimed at protecting investors rather than imposing limitations. While ETFs may not suit every retail investor, their approval would make blockchain technologies more appealing to mainstream audiences.

Andrey Stoychev, a project manager at the crypto exchange Nexo, suggested that BTC's surge following the court's decision provided a much-needed boost in investor morale after a challenging week. However, he speculated that this uptick might not lead to a straightforward ascent into the next bull market, as evidenced by BTC retracing all its gains from the excitement surrounding Grayscale's victory.

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