On the morning of potential spot bitcoin ETF approval, here’s how we got here

The Securities and Exchange Commission could approve spot bitcoin ETFs today.

A fair question for those still grasping the possible news: How did we get to this point?

The launch of bitcoin futures ETFs, the entrance of a TradFi giant in BlackRock, and Grayscale’s legal victory over the SEC have preceded the upcoming decision. The three milestones appear, at least in part, to have made a difference in their own way.

Indeed, various industry watchers and executives expect the regulator could allow bitcoin ETFs to trade as early as Thursday, despite the SEC’s history of blocking such funds for years.

The SEC could still stop such products, though many say the latest developments don’t point toward that possibility.

A person familiar with the ETF filings told Blockworks the SEC had asked firms to update bracketed and incomplete language in its registration statements by Monday.

Fund issuers indeed amended the so-called S-1 or S-3 forms on Monday and Tuesday, revealing planned fund fees and other details. BlackRock, as well as Ark Invest and 21Shares, revealed new intended fees for their proposed products on Wednesday.

This series of registration statement updates followed stock exchanges last week finalizing what are known as 19b-4 documents on behalf of the issuers. Such proposals would have to get the SEC green light before the bitcoin funds could launch.

Former SEC Chair Jay Clayton said during a Monday interview with CNBC that spot bitcoin ETF approval appears to be “inevitable.”

A timeline of events

The bid for a spot bitcoin ETF started with the Winklevoss twins in 2013. The SEC denied that planned fund in 2017.

After several more years of unsuccessful attempts by prospective spot bitcoin ETF issuers, SEC Chair Gary Gensler said during an August 2021 virtual event that the commission’s staff would look favorably upon planned funds that were limited to holding bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME).

Several firms filed for bitcoin futures ETFs in response, and ProShares became the first to offer one in October 2021. The fund has grown to roughly $2 billion in assets under management.

The SEC denied Grayscale Investments’ proposed conversion of its Bitcoin Trust (GBTC) to an ETF in 2022. The firm sued the regulator, claiming its decision to do so — given its greenlighting of bitcoin futures funds — was “arbitrary and capricious.”

Judges ruled in favor of Grayscale in August, and the SEC chose not to challenge the decision. A number of segment observers viewed the development as very bullish for spot bitcoin ETF approval.

“The Grayscale team is incredibly proud of the work we have done to grow GBTC into the world’s largest bitcoin investment vehicle, blazing a path forward for all spot bitcoin ETFs to come to market,” a company spokesperson said in a statement.

Prior to the Grayscale court win, BlackRock unveiled its spot bitcoin ETF. The asset manager, which manages roughly $9 trillion in assets, has only ever had one of its proposed ETFs denied by the SEC, according to Bloomberg Intelligence analysts — a structure known as a nontransparent ETF that wouldn’t disclose daily holdings, as is standard.

The fund giant’s standing in the financial industry puts additional political pressure on the SEC approving spot bitcoin ETFs, some have argued.

The continued amended spot bitcoin ETF proposals with updated language and intended fees signal ongoing dialogue with the SEC, which 21Shares President Ophelia Snyder in November highlighted as a “pattern break” that could result in a ruling different from rejections of the past.

Though the SEC’s X account posted Tuesday that the regulator had cleared spot bitcoin ETFs, SEC Chair Gary Gensler said the account had been “compromised,” noting that the regulator had not approved such funds.

So here we are. With an SEC decision on spot BTC offerings due soon, only time will tell.

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