On “Bloomberg Markets,” Michael Sonnenshein, the CEO of Grayscale Investments, characterized the U.S. appeals court’s decision to overturn the U.S. Securities and Exchange Commission’s (SEC) block on his company’s proposed Bitcoin exchange-traded fund (ETF) as a significant victory. This ruling has reignited optimism for launching the inaugural US crypto ETF. However, the SEC has pushed back its decision deadline until October for all crypto ETF applications.
The Grayscale Court Win
In recent days, the D.C. Circuit Court of Appeals passed a ruling indicating that certain arguments put forth by the regulator in rejecting Bitcoin ETF applications appeared “random and arbitrary.” Grayscale, backed by Digital Currency Group, maintained that the SEC lacked a solid foundation for dismissing its proposal to transform the Grayscale Bitcoin Trust into an ETF. The court determined that the SEC’s refusal contradicted its endorsement of two Bitcoin futures ETFs and failed to justify the differential treatment of these products, considering the “99.9% correlation” between spot and futures Bitcoin market prices.
Grayscale‘s assertion that its proposed ETF was “substantially akin” to the futures-based ETFs was upheld. Judge Neomi Rao, who authored the unanimous court decision, emphasized that the interconnectedness of the underlying assets—Bitcoin and Bitcoin futures—coupled with identical surveillance sharing agreements with the CME implied that both held an equivalent potential to detect fraudulent or manipulative activities within the respective markets. Consequently, the appeals court mandated that the regulator revisit the application for further review.
Delayed SEC Crypto ETF Decisions
The SEC has pushed back its decision deadline until October for all the crypto ETF applications related to spot Bitcoin exchange-traded funds (ETFs). These applications were submitted by various entities, including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets, earlier this year, as per agency records on Thursday.
The SEC commenced its evaluation of the latest array of applications, encompassing both cryptocurrency-heavy and conventional financial firms like Wise Origin (Fidelity), BlackRock, and Invesco Galaxy, during the preceding month. The applicants aspire to launch the inaugural spot Bitcoin ETF, a concept that proponents argue would facilitate more widespread retail investment in the Bitcoin realm while sparing investors the complexities associated with establishing a digital wallet or purchasing Bitcoin directly.
In the latest developments, the SEC has chosen not to reach a conclusive verdict at this juncture. Instead, it has opted to extend existing comment periods and encourage greater public input regarding these applications. The updated deadlines for Wise Origin, Galaxy, and WisdomTree have been set for October 17, followed by Valkyrie two days later and Bitwise with a deadline of October 16.
The regulatory body has a total of 240 days from the initiation of its application review to make a final determination of approval or denial. Historically, SEC staff have utilized all available comment and review periods to prolong their ultimate verdict until the culmination of these 240 days, rendering the recent agency filings on Thursday quite predictable.
