The DC Circuit Court Vacates SEC’s Denial of Grayscale’s GBTC Conversion

Key Points:

• The DC Circuit court of appeals has vacated the SEC’s denial of Grayscale’s proposal to convert its GBTC into a spot Bitcoin ETF.
• Circuit Judge RAO stated that the denial was arbitrary and capricious due to the SEC’s failure to explain its different treatment of similar products.
• This victory does not automatically convert GBTC into a spot Bitcoin ETF, but it brings us closer to that reality.
• The order is sent back to the SEC, and they have 45 days to appeal and request an en banc hearing.
• The price of GBTC surged over 19% on the news, and Bitcoin witnessed a rise above 5%.

Grayscale’s GBTC Conversion: A Step Forward

After facing initial denial, Grayscale’s proposal to convert its GBTC into a spot Bitcoin ETF has received a significant boost. The DC Circuit court of appeals has vacated the SEC’s denial, stating that it was arbitrary and capricious in its treatment of similar products. While this victory does not automatically convert GBTC into a spot Bitcoin ETF, it does bring us one step closer to that reality.

According to Circuit Judge RAO, the SEC failed to explain its different treatment of similar products, which undermines the standard for reasoned decision making. The court agreed that the spot and future markets for bitcoin are highly correlated, indicating a financial and mathematical relationship that should be recognized. The SEC’s unexplained discounting of this correlation falls short and contributes to the arbitrariness of their denial.

However, it is important to note that the order is now being sent back to the SEC. They have 45 days to appeal and file for an en banc hearing. Unlike today’s decision made by three judges, an en banc hearing involves all 17 judges on the court, ensuring a more comprehensive evaluation of the case. Bloomberg ETF analyst James Seyffart explains that this option is available to the SEC.

The announcement of the court’s decision had an immediate impact on the market. The price of GBTC experienced a staggering 19% surge, indicating the positive sentiment among investors. Moreover, Bitcoin itself saw a rise above 5%, further highlighting the market’s enthusiasm towards the potential conversion of GBTC into a spot Bitcoin ETF.

In conclusion, the DC Circuit court’s decision to vacate the SEC’s denial of Grayscale’s GBTC conversion is a significant step forward. While the process is not yet complete, this victory brings us closer to the realization of a spot Bitcoin ETF. The response from the market, with both GBTC and Bitcoin witnessing notable surges, reflects the growing excitement and anticipation surrounding the potential for this conversion. As the case moves forward, all eyes will be on the SEC’s appeal and the potential for an en banc hearing.