In an opinion released Aug. 29, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit sided with Grayscale in its case against the SEC. The lawsuit centered on the regulator's denial of an application to convert the Grayscale Bitcoin Trust to a spot bitcoin ETF, with Grayscale calling the denial "arbitrary and capricious."
The SEC failed to adequately explain why it had approved the listing of bitcoin futures exchange-traded products but not Grayscale's proposed product, the judge's opinion said. The court granted Grayscale's petition for review and vacated the SEC's order, it said. Two days later, the SEC deferred on filings from several firms on their proposed spot bitcoin ETFs.
While the news was "certainly exciting," the court "did not say that Grayscale is entitled to an ETF," said Tom Staudt, chief operating officer at ARK Investment Management, one of a number of firms currently in the race to offer a spot bitcoin ETF.
Still, the Grayscale decision is "a big breakthrough for bitcoin," Mr. Staudt said Aug. 29, adding that he believes a spot bitcoin ETF would find an appetite among institutional investors such as pension funds.
"Absolutely. I do," he said, adding that for such investors, "their alternatives in the market at an institutional-grade level have been very few and they've been very expensive."
A spot bitcoin ETF would constitute an attractive option for institutions seeking to benefit from bitcoin exposure "without the risks of holding the asset directly," said Mr. Mónica in written comments.
"An SEC-regulated Bitcoin ETF would unlock the next generation of crypto adoption, allowing trillions in institutional capital to come off the sidelines," he said.
And, if the SEC were to approve multiple spot bitcoin ETFs simultaneously, competition for the lowest management fee would likely push down costs, Mr. Mónica added.
Steven McClurg, chief investment officer and co-founder at Valkyrie, which has filed to offer a spot bitcoin ETF called the Valkyrie Bitcoin Fund, said in an interview following the release of the court's opinion that Valkyrie had been following the case closely.
"And based on all the arguments that we saw, we didn't think that there really was a choice other than the ruling that came out," he said.
Judging from the volume of phone calls Valkyrie received Aug. 29, others appeared to be following the case as well.
"Today, the number of calls we've gotten are probably more than we've gotten in the last year from institutional clients," Mr. McClurg said Aug. 29. "This is a vehicle that makes it easy for pensions to invest in."
Most pension funds aren't going to "open up a Gemini account and go buy bitcoin themselves," he said.