According to a person familiar with the situation, the Securities and Exchange Commission (SEC) won’t appeal a court’s harsh overturn of its decision to deny Grayscale’s request to convert its bitcoin trust into a more investor-friendly exchange-traded fund, potentially paving the way for the first bitcoin ETF in the United States. The market regulator has until Friday at midnight to determine whether to challenge the court’s ruling, but the SEC will let that time pass without filing an appeal, the source added. The news was first reported by Reuters.
The SEC’s rejection of Grayscale Investment’s application to turn the Grayscale Bitcoin Trust (GBTC) into an ETF was deemed “arbitrary and capricious” by the D.C. Circuit Court of Appeals, who decided that the decision must be revisited. According to the court, government agencies must “treat like cases alike.”
Circuit Judge Neomi Rao stated in August that the Securities and Exchange Commission had just permitted the trading of two bitcoin futures funds on national exchanges but had rejected the approval of Grayscale’s bitcoin fund.
The SEC’s rejection of Grayscale Investment’s application to turn the Grayscale Bitcoin Trust (GBTC) into an ETF was deemed “arbitrary and capricious” by the D.C. Circuit Court of Appeals, who decided that the decision must be revisited. According to the court, government agencies must “treat like cases alike.”
Circuit Judge Neomi Rao stated in August that the Securities and Exchange Commission had just permitted the trading of two bitcoin futures funds on national exchanges but had rejected the approval of Grayscale’s bitcoin fund.
In October 2021, Grayscale made its initial application to convert its closed-end fund into an ETF. The biggest cryptocurrency fund in the world, GBTC, has been trading below the value of its holdings in Bitcoin since February 2021. That discount once rose to about 50%, but it has now fallen to about 17%.
The discount would be eliminated if GBTC were converted to an ETF, according to Grayscale, as it would reduce the price-to-underlying-bitcoin disparity. Due to the creation-redemption paradigm supported by the structure of ETFs, additional ETF shares may be issued to satisfy demand or redeemed to curtail supply.
