The U.S. may be about to get its first spot bitcoin exchange-traded fund, after a federal court ruled that the U.S. Securities and Exchange Commission (SEC) must review its rejection of Grayscale Investments’ attempt to convert the Grayscale Bitcoin Trust (GBTC) into an ETF. The legal victory potentially opens the door for a spot bitcoin ETF in the U.S. Advocates have long argued that allowing this type of product would enable a greater swath of the general public to invest in bitcoin without having to go through the trouble of buying it directly or deal with potential issues like their custody providers collapsing. The SEC has disapproved every such ETF application it’s reviewed to date, though a new swath of applicants are now hoping for success. Circuit Judge Neomi Rao, writing the D.C. Circuit Court of Appeals’ opinion, said that federal agencies are required to “treat like cases alike.” “The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund. Petitioning for review of the Commission’s denial order, Grayscale maintains its proposed bitcoin exchange-traded product is materially similar to the bitcoin futures exchange-traded products and should have been approved to trade on NYSE Arca. We agree,” she said. The SEC did not explain why it was treating these products differently, making the Grayscale denial “arbitrary and capricious,” she added.
Bitcoin’s price spiked after the ruling was unveiled. The ruling seemed to specify that the issue wasn’t the SEC’s rejection of the application so much the agency’s failure to properly explain itself. “Grayscale has demonstrated its proposed bitcoin ETP is materially similar, across relevant regulatory factors, to the approved bitcoin futures ETPs,” the ruling said. “First, the underlying assets – bitcoin and bitcoin futures – are closely correlated.