Court grants Grayscale’s petition for review in bitcoin ETF case against SEC

The United States Court of Appeals granted Grayscale’s petition for review on Tuesday

article-image

Ascannio/Shutterstock modified by Blockworks

share

A three-judge panel for the DC Circuit Court of Appeals sided with Grayscale Investments in its battle against the Securities and Exchange Commission.

The win by Grayscale on Tuesday comes after the firm sued the SEC in June 2022 — when the US securities regulator blocked the crypto-focused asset manager from converting its Bitcoin Trust (GBTC) to an ETF. 

The firm had argued that the SEC’s approval of ETFs investing in bitcoin futures contracts, but not proposed products that would hold bitcoin directly, is “arbitrary and capricious.”

The judgment granted Grayscale’s petition for review and ordered that “the commission’s order be vacated,” according to the filing. This means that the SEC has to review Grayscale’s application, which it had previously rejected.

Grayscale CEO Michael Sonnenshein said in a Tuesday tweet that the company’s legal team is “actively reviewing” the court’s decision. 

Loading Tweet..

“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,” a Grayscale spokesperson told Blockworks. 

The firm “will be pursuing next steps with the SEC” after reviewing the opinion, the representative added.

“We are reviewing the court’s decision to determine next steps,” an SEC spokesperson told Blockworks in an email.

The price of bitcoin rose sharply on the news, rising above $27,000 after beginning the day around $26,100, according to TradingView data.

The court’s decision on Tuesday builds on industry support for the notion that Grayscale would notch a rare win over the SEC

Grayscale legal strategist Donald Verrilli Jr. said during March oral arguments in the case that there’s a 99.9% correlation between prices in the bitcoin futures market and the spot bitcoin market.  

The Tuesday filing echoed that sentiment. The court found that the SEC did not dispute Grayscale’s “evidence that the spot and futures markets for bitcoin are 99.9 percent correlated, nor suggested that market inefficiencies or other factors would undermine the correlation.” 

“The Commission’s unexplained discounting of the obvious financial and mathematical relationship between the spot and futures markets falls short of the standard for reasoned decision making,” the filing said.

Emily Parise, an attorney representing the SEC, had said the causal relationship between the bitcoin futures and spot markets “is the key empirical question that we don’t know the answer to.”

DC Court of Appeals Judge Neomi Rao — as part of questioning some said appeared favorable to Grayscale — said during the March hearing that the SEC had not explained why Grayscale was wrong about the relationship between the bitcoin spot and futures markets. 

Read more: Grayscale appears to win opening salvo in bitcoin ETF case vs SEC

Bloomberg Intelligence Analyst James Seyffart said that he believed Grayscale had a 70% chance to win.

Despite the ruling, next steps are unclear. 

Industry watchers had previously pointed out that if the courts deem the SEC’s denial of GBTC’s conversion insufficient, the regulator could potentially deny it via different reasoning. 

Updated August 29, 2023 at 11:37 am ET: Added quote from SEC spokesperson.

Updated August 29, 2023 at 11:00 am ET: Added quotes from Tuesday court ruling.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

Research Report Templates.png

Research

An overview of the Base Ecosystem, with a focus on market leaders.

article-image

Although bitcoin hitting $120k by year’s end is looking unlikely

article-image

About 270 million HYPE has been claimed, valued around $7.6 billion

article-image

Stanford professors David Mazières and Dan Boneh will lead the lab alongside a cohort of graduate student researchers

article-image

With more companies holding BTC, bitcoin yielding strategies could become “a new corporate finance norm,” CoinShares posed

article-image

The proposal comes after Polygon governance considered a controversial use of bridged liquidity for yield

article-image

Can the community balance its decentralized ethos with the need for inclusivity and constructive debate?