Grayscale wins court ruling to pave way for Bitcoin ETFs

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Bitcoin prices surged after the U.S. District of Columbia Court of Appeals’ decision made it possible for the creation of the first U.S. bitcoin exchange-traded fund (ETF).

For years, the crypto industry had sought Securities and Exchange Commission (SEC) approval for spot Bitcoin ETFs. The SEC had also rejected crypto asset manager Grayscale Investments’ application for a Bitcoin ETF called GBTC over investor safety risks.

Per Tuesday’s filing, the court ruled 3-0 in favor of Grayscale, meaning that the SEC’s rejection of Grayscale’s Bitcoin ETF application was vacated. The three-judge panel determined that the SEC did not present a satisfactory explanation for denying the firm’s application.

“The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” the filing reads. “We therefore grant Grayscale’s petition and vacate the order.”

Grayscale CEO Michael Sonnenshein said in a statement, “This is a historic milestone for American investors, the bitcoin ecosystem, and all those who have been advocating for bitcoin exposure through the added protections of the ETF wrapper.”

Grayscale argued that GTBC would allow investors to gain exposure to Bitcoin, the world’s largest cryptocurrency, without having to own it. According to Grayscale, a bitcoin ETF is likely to be less risky for investors since the speed of the bitcoin technology is slower than stock-trading technologies.

In a statement emailed to financial services company Seeking Alpha, AltTab Capital CEO Greg Moritz commented on the milestone, saying, “It’s excellent that the judge in the Grayscale vs. SEC case was able to see the obvious correlation between Bitcoin futures and spot price.”

Aftermath of the court ruling

According to data from Santimant, the price of Bitcoin surged by six percent following Grayscale’s victory, pushing its market rate from $27,400 to $28,000. A similar increase also happened to the second-largest cryptocurrency, Ethereum, which climbed from $1,640 to $1,740.

Shares of Coinbase, the largest U.S.-based crypto exchange and custodian partner in spot bitcoin ETF applications, rose over 14 percent. Shares of miner Marathon Digital (MARA) bolted at about 29 percent, while Hut 8 Mining (HUT) and Riot Plaforms Inc. (RIOT) each gained 17 percent.

Grayscale itself saw a 17.4 percent spike in stock value. Receiving worldwide attention after its victory, Grayscale is currently enjoying its busiest trading session after 14 months.

After the crypto market crash of June 2022, the crypto asset manager discounted its shares, going as high as 45 percent off. Some investors, however, have been purchasing its shares over the last three to six months. Gambling themselves on Grayscale’s court decision, they are currently enjoying the benefits of the presently collapsed discount.

Despite the ruling, the legal battle is yet to conclude. Both parties still have a 45-day window to appeal the verdict. If this happens, the case will move to the U.S. Supreme Court or undergo an en banc panel review. Should the SEC opt not to appeal, the court would provide instructions for the implementation of its decision.

Meanwhile, nine other firms are awaiting the SEC’s approval for their ETF applications. These include BlackRock, VanEck, Invesco, Fidelity, WisdomTree and Bitwise, all of which have filed for spot bitcoin ETFs on Nasdaq or CBOE Global Markets.