The Securities and Exchange Commission (SEC) will not contest a court ruling favoring Grayscaleโs proposed spot Bitcoin exchange-traded fund (ETF).
An Oct. 14 update from Bloomberg citing an inside source has revealed that the SEC has chosen not to appeal the District of Columbia Court of Appealsโ decision from August, which argued that the regulator had erred in dismissing Grayscaleโs Bitcoin exchange-traded fund application.
The case has been under the industryโs microscope as various players in the financial landscape have vied for the approval of spot Bitcoin ETFs in recent times.
The SECโs surprising move to step back may well set the stage for a comprehensive review of Grayscaleโs proposal.
The investment giantโs proposed ETF is designed to expose clients to Bitcoin (BTC), the worldโs leading cryptocurrency by market capitalization, without requiring direct ownership.
Previously, the SEC thwarted all spot Bitcoin ETF applications, including Grayscaleโs, on the premise that applicants could not adequately shield investors from potential market manipulation.
Matters escalated when Grayscale challenged the SECโs decision in court, asserting that the previously approved surveillance mechanisms to counteract fraudulent activities in Bitcoin futures-based ETFs should also apply to their proposed spot ETF.
The appeals court reinforced Grayscaleโs stance, stating that the SEC did not explain the substantive difference between the two setups. Instructions on how the courtโs decision should be implemented are anticipated, likely directing the SEC to revisit Grayscaleโs application.
This development could also impact other financial mammoths like BlackRock and Fidelity, who have similar applications pending for a spot Bitcoin ETF.
With the SEC expected to make decisions on these applications by 2024 at the latest, the landscape for crypto-based financial products could be on the verge of a paradigm shift. At the time of writing, representatives from Grayscale and the SEC had not provided any comments on this development.
