A federal appeals court Tuesday ruled in favor of Grayscale Investments in its closely watched case against the SEC over the regulator's denial of an application to convert the Grayscale Bitcoin Trust to a spot bitcoin ETF.
"Today, the D.C. Circuit ruled in favor of Grayscale in our lawsuit challenging the SEC's decision denying GBTC's conversion to an ETF," a Grayscale spokeswoman said in a statement Tuesday. "This is a monumental step forward for American investors, the bitcoin ecosystem, and all those who have been advocating for bitcoin exposure through the added protections of the ETF wrapper."
In an order issued June 29, 2022, the SEC disapproved a proposed rule change filed with it by NYSE Arca, an exchange, to list and trade shares of the trust. Grayscale filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit the same day.
During March 7 oral argument in the case, Donald B. Verrilli Jr., a Munger, Tolles & Olson partner who represented Grayscale, said that the "fundamental problem" with the SEC's order is that it contradicts previous SEC orders greenlighting bitcoin futures exchange-traded products that pose the same risk of fraud and manipulation and have the same CME surveillance mechanism in place to guard against such risks as the spot bitcoin ETP that the SEC had disapproved.
In its opinion released Tuesday, the court said that the SEC had failed to explain adequately why it had approved the listing of two bitcoin futures ETPs but not Grayscale's proposed bitcoin ETP.
"In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful," the opinion said. "We therefore grant Grayscale's petition for review and vacate the Commission's order."
The SEC is "reviewing the court's decision to determine next steps," an SEC spokesman said Tuesday.
