Grayscale Wins Court Battle Over Bitcoin ETF Approval Against the SEC

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In a significant court victory, Grayscale Investments has won a crucial court battle against the Securities and Exchange Commission (SEC) over its application for a spot Bitcoin exchange-traded fund (ETF).

The Court’s Argument

The court’s decision stated that the SEC failed to give an adequate basis for its disparate handling of similar financial products. As a result, the court accepted Grayscale’s appeal and annulled the ruling, granting the corporation a huge success in its pursuit of a Bitcoin ETF.

The court’s argument was anchored in the assertion that since Grayscale’s proposed ETF would operate with similar mechanisms as the already sanctioned futures-based ETFs, it should have an equivalent capability to detect and prevent fraudulent or manipulative activities in the Bitcoin and Bitcoin futures markets.

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The ruling sends a clear message that the court recognizes the equivalency between spot Bitcoin ETFs and their futures-based counterparts. 

Options Available to the SEC

Following the court’s ruling, the SEC has a 45-day window during which it can request an en banc hearing, a rehearing involving all three judges. Should the SEC choose not to exercise this option, the court will issue a final mandate outlining the next steps in the process.

The mandate will reveal vital information about how Grayscale’s proposal will be evaluated and whether the regulatory landscape for crypto-based ETFs will change.

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Nathan Geraci, President of The ETF Store, an advisory firm, has highlighted that the SEC might choose to force the closure of existing futures-based Bitcoin ETFs. However, Geraci noted that this option appears unlikely, especially given the recent approval of the Volatility Shares 2X Bitcoin Strategy ETF (BITX). 

Court’s Opinion: A Milestone for the Crypto Industry

Meanwhile, the court’s opinion in favor of Grayscale Investments signifies a significant milestone for the cryptocurrency industry. It underscores the notion that the market has evolved and matured to a point where it can accommodate regulated financial products based on digital assets. 

Recent data from CoinGecko revealed that the price of Bitcoin (BTC) experienced a sudden surge of 5.4%, reaching a price of $27,450 following the court’s decision. This sharp price increase emphasizes the crypto market’s sensitivity to regulatory developments and institutional adoption. 

This legal precedent also opens a pathway for companies such as Fidelity Investments to advocate for its proposals while holding regulatory agencies accountable for the consistency and transparency of their decisions.

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