SEC Won’t Appeal Loss in Grayscale Case, Boosting the Odds GBTC Can Become a Bitcoin ETF

Bitcoin’s price immediately shot up after the news came out.

AccessTimeIconOct 13, 2023 at 9:07 p.m. UTC
Updated Oct 16, 2023 at 3:45 p.m. UTC
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  • The SEC was rebuked by a court in August for how it rejected Grayscale’s application to turn its bitcoin (BTC) trust into an ETF.
  • The regulator won’t appeal that loss, a person familiar with the matter said Friday, boosting the odds the Grayscale Bitcoin Trust (GBTC) can be turned into a more-appealing ETF.
  • BTC's price jumped on the news.

The Securities and Exchange Commission won’t appeal a court’s scathing reversal of its decision not to let Grayscale convert its bitcoin trust into a more investor-friendly exchange-traded fund, according to a person familiar with the matter, possibly clearing the way for the first bitcoin ETF in the U.S.

The markets regulator had until midnight Friday to decide on challenging the court’s decision, but the SEC will let that deadline come and go without appealing, the person said. Reuters reported the news earlier.

Bitcoin (BTC) shot above $27,000 after the news came out.

In August, the D.C. Circuit Court of Appeals ruled that the SEC’s denial of Grayscale Investment’s application to convert the Grayscale Bitcoin Trust (GBTC) into an ETF was invalid and must be reviewed, calling it an “arbitrary and capricious” rejection. The court 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,” Circuit Judge Neomi Rao said in August.

SEC spokespeople didn’t immediately respond to a request to confirm the agency’s decision. A Grayscale spokeswoman declined to comment before the decision is confirmed.

It’s unclear how the SEC will proceed in its next round with Grayscale’s application. The agency still has the authority to deny it for other reasons besides the ones courts shot down, though Grayscale could challenge those again in court.

Grayscale first applied to convert its closed-end fund into an ETF in October 2021. GBTC is the largest cryptocurrency fund in the world and has been trading at a discount to its bitcoin holdings since February 2021. That discount reached almost 50% at one point but has since retreated to levels around 17%.

Grayscale has long advocated that the conversion of GBTC to an ETF would eliminate the discount as it would close the gap between the price and the underlying bitcoin. The structure of ETFs allows for a creation-redemption model which means new ETF shares can be created to meet demand or redeemed to reduce supply.

Grayscale – a unit of Digital Currency Group, which is also the parent of CoinDesk – is among a number of other entities that have filed for bitcoin spot ETFs. BlackRock and Fidelity are among those also awaiting approval from the SEC.

UPDATE (Oct. 13, 2023, 21:35 UTC): Adds that a person familiar with the matter confirmed the news.

Edited by Nick Baker.

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Lyllah Ledesma

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.


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