The crypto sector was pleasantly surprised this past week by an SEC decision not to challenge a court ruling regarding the creation of a possible spot bitcoin ETF (Electronically Traded Fund).
It may signal that a spot ETF is close to being made available in the U.S.
That’s important, because institutional investment in the world’s first and still by far the largest market cap crypto, will likely pour in as soon as such an ETF is approved.
The court ruling involved Grayscale, the large institutional holder of bitcoin, which currently, along with a handful of other funds, offers a futures ETF.
Futures ETFs were greenlit several years ago.
Grayscale has been arguing that being permitted to offer a bitcoin futures ETF, but not a spot ETF (one based on the current market price) has distorted the pricing of its futures product, and is arbitrary and makes no legal sense.
And in August, the Circuit Court of Appeals for Washington D.C. agreed with Grayscale, calling the SEC’s refusal “arbitrary and capricious.”
It recommended that the agency review its stance in accordance with comparable instances of financial regulation.
The SEC had essentially left Grayscale’s Bitcoin fund application in limbo, while allowing trading of several bitcoin futures funds.
Since 2021, the Grayscale futures Bitcoin ETC has mostly traded far below the spot price of bitcoin—sometimes as much as 50 percent less, obviously a huge hit.
Crypto enthusiasm on Elon Musk’s social media platform X (formerly Twitter) was boosted by the news.
The Bitcoin Magazine thread announcing the SEC’s decision not to appeal had hundreds of comments that were generally upbeat:
This is a huge victory for $BTC investors and the crypto industry as a whole! A spot $BTC ETF would provide investors with a more convenient and efficient way to gain exposure to Bitcoin, and it would also send a strong signal that the US is becoming more open to digital assets
Some, of course, were skeptical that the SEC would let the entire matter go without a further fight:
They are going to delay.. I can’t imagine Gary gensler is just going to give up that easily but hey I hope I’m wrong
The SEC’s decision to decline to appeal, while hailed as a positive development, doesn’t mean the SEC will automatically approve of a spot ETF.
Such a financial product could be opposed on grounds as yet unarticulated, not related to the court’s ruling.
In that case, Grayscale would almost certainly appeal again.
So, yes, this may still take awhile.