Grayscale-SEC Legal Battle: Court Orders Financial Regulator To Review Spot BTC ETF Application

Grayscale Investments LLC's bid to offer an exchange-traded fund based on Bitcoin was formalized by a federal appeals court Monday as a massive win as it ordered the U.S. Securities and Exchange Commission (SEC) to abolish its rejection of the asset manager's application for spot Bitcoin ETF.

"In accordance with the judgment of August 29, 2023, and pursuant to Federal Rule of Appellate Procedure 41, this constitutes the formal mandate of this court," the D.C. Circuit Court of Appeals ordered the SEC as it closed the books on the dispute between the major Wall Street regulator and Grayscale, with its final ruling.

This decision basically solidifies the court's earlier ruling on Aug. 29, which noted that the SEC was "arbitrary and capricious" in its decision to reject Grayscale's bid to convert its $17 billion Grayscale Bitcoin Trust (GBTC) into a spot ETF.

Grayscale took a significant step toward converting its digital currency investment product, the GBTC, into a Bitcoin ETF last week when it filed a Form S-3 registration statement with the SEC after the financial regulator chose not to appeal a federal court ruling. This paves the way for Grayscale Investments to launch a spot Bitcoin ETF.

"Today, we filed Form S-3 as part of our efforts to convert $GBTC to an ETF. We remain committed to working collaboratively and expeditiously with the SEC on behalf of GBTC's investors," Grayscale announced last week.

With the court's final ruling, the ball is now in the SEC's court, where it could choose to approve the investment giant's application or reject it based on other grounds.

Aside from that, the SEC is also in the process of arriving at a decision on multiple spot Bitcoin ETF applications led by ARK21, BlackRock, and other Wall Street giants.

"The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF," Jennifer Rosenthal, a spokesperson for Grayscale, said in a statement.

"GBTC is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors," the investment giant added.

The court's decision is a positive sentiment that added to the already optimistic crypto market, with BlackRock's spot Bitcoin ETF ticker listed on DTCC.

BTC, the world's largest crypto asset by market capitalization, was trading in the green zone at $33,896.89 as of 3:23 a.m. ET on Tuesday, with a 24-hour trading volume up by 193.93% at $47.3 billion. It represented a 10.47% increase in the last 24 hours and a 20.7% gain over the past seven days.

BTC's total circulating supply stands at 19.52 million BTC, with its value up by 10.59% at a $661.48 billion market cap, according to data from CoinMarketCap.