The U.S. Securities and Exchange Commission (SEC) is approaching its deadline to decide on the recent court ruling in favor of Grayscale Investments. The decision pertains to Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF).
Likelihood of Appeal Seen as Low
While experts believe the SEC is unlikely to appeal the court’s decision, there are potential avenues for the SEC to delay the approval of Grayscale’s spot Bitcoin ETF conversion.
Multiple Scenarios in Play
The SEC’s options include appealing the decision to the U.S. Supreme Court, requesting the Appeals Court to revisit its ruling, or adhering to the court’s order and reviewing Grayscale’s ETF bid.
If SEC does not appeal Grayscale ruling by tomorrow, does that effectively mean they will allow it to convert to ETF at *some* point ?
— Reformed central banker (@ErnstBlofield) October 12, 2023
According to Bloomberg ETF analyst Eric Balcunas, an appeal is viewed as a longshot, but he noted that there is always a chance of alternative developments.
Potential for Delays
Bloomberg ETF analyst James Seyffart also considered an SEC attempt to deny Grayscale’s application on new grounds as unlikely and challenging. However, he suggested that the SEC might employ methods to keep delaying the decision.
A legal note from Ropes & Gray pointed out that the SEC could send the GBTC application back for review, giving the regulator an opportunity to reject it on different grounds. In this scenario, the new denial could trigger another appeal by GBTC.
Another potential delay could arise if the New York Stock Exchange is required to make a new filing to list GBTC. This situation might extend the SEC‘s decision-making process, possibly taking up to eight months.
Impact on Spot Bitcoin ETF Landscape
The focus is particularly on Grayscale’s application as an approved spot Bitcoin ETF could set a precedent for similar products. Several spot Bitcoin ETF applications are currently under review by the SEC, with most facing delays and pushing their final approval deadlines to March 2024 or beyond.
The odds of an approved spot Bitcoin ETF this year are estimated at 75%, according to Bloomberg analysts, who raised the likelihood to 95% by the end of 2024 after Grayscale’s recent court victory.
