Until recently, the U.S. Securities and Exchange Commission (SEC) appeared to take a steadfast stance on the launch of spot Bitcoin (BTC) exchange-traded funds (ETFs). These funds, which track the price of Bitcoin and how stocks can be traded on the stock exchange, have long been on the SEC's blacklist. This changed when asset manager Grayscale won a major legal battle against the SEC.
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The SEC approves Bitcoin ETFs
The victory in Grayscale's lawsuit against the SEC had a significant impact on the Commission's stance. SEC Chairman Gary Gensler admitted in an interview with CNBC's Squawk Box that this victory in August 2023 changed their view of crypto investment vehicles, Cointelegraph reports:
“We had rejected a number of these (applications for a spot Bitcoin ETF) over the years and something had changed. Because we firmly believe in the rule of law and respect for the courts, and with a new court decision in mind, we have decided to move forward,” Gensler said.
Grayscale's litigation and consequences
In June 2022, the SEC rejected Grayscale's application to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF, citing flaws in its design to prevent “fraudulent and manipulative practices.” This prompted Grayscale to appeal to the US Court of Appeals for the District of Columbia Circuit.
The August 29, 2023 ruling found in Grayscale's favor, with the court finding that the SEC's legal basis for the rejection was insufficient. According to the judge, converting Grayscale's GBTC fund into an ETF should therefore be permitted.
This legal victory proved crucial for Grayscale. On January 10, the SEC gave its blessing to ten ETFs that hold Bitcoin as an underlying asset. The opening trading session saw significant activity, with Grayscale's GBTC accounting for $2.3 billion in trading volume – nearly half of the day's total volume of $4.5 billion, according to data from Yahoo Finance.
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