Grayscale sued the SEC over the regulator's denial of an application to covert the Grayscale Bitcoin Trust to a spot bitcoin ETF. 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.
The SEC failed to adequately explain why it had approved the listing of bitcoin futures exchange-traded products but not Grayscale's proposed ETP, the opinion said, calling the denial of Grayscale's proposal "arbitrary and capricious."
"My crystal ball is as murky as anybody's," LaValle said during an Oct. 12 live-streamed panel discussion at the Security Traders Association's 90th Annual Market Structure Conference in Washington, when asked by moderator Michael Piwowar, a former SEC commissioner who is currently executive vice president of finance at the Milken Institute, about the odds of an SEC appeal.
The 45-day period expires Oct. 13, LaValle said.
LaValle emphasized, however, that whatever the SEC decides, Grayscale remains operationally ready to convert the trust, known by the symbol GBTC, to a spot bitcoin ETF saying that "the most important thing to recognize is that the market wants this, we want this, we're operationally ready for it."
The SEC could seek an en banc review, asking for the entirety of the court to review the decision, he said. However, "given that we had the chief judge on our panel, given that we had a very balanced panel of judges and given that it was unanimous," it seems like it would be a difficult appeal for the SEC to win, LaValle said.
The court's opinion was "a beatdown of the SEC," Piwowar said.
"If you look at the SEC's arguments for denying on this, it was sort of random, the distinction between the spot versus the futures," he said.
The SEC declined to comment, a spokesperson said on Oct. 13.