Nine fund managers have made applications to the US Securities and Exchange Commission (SEC) to list spot Bitcoin Exchange Traded Funds (ETF) so far. Of these, Grayscale has taken up a position on the front lines, winning an important legal victory over the SEC in its bid to convert the Grayscale Bitcoin Trust into an ETF.
On Friday, October 20, the court that ruled in favor of Grayscale will issue a mandate to the SEC, possibly forcing the regulator into action after months of dragging its feet on Bitcoin ETF applications.
For years, the SEC doggedly refused to approve the listing of a single spot Bitcoin ETF, even as it sanctioned the first futures-based Bitcoin funds in 2021.
However, that double standard has come to undermine the regulator’s argument against approving spot Bitcoin funds. Now, after a federal appeals court sided with Grayscale, the SEC could be forced to reconsider the firm’s application, having initially rejected it.
On Friday, the court will issue a mandate that will make its August opinion effective, potentially outlining a path toward approval for Grayscale’s bid to convert its Bitcoin Trust into an ETF, as well as other ongoing applications.
Specifically, the court may clarify whether its opinion voids the SEC’s initial rejection of Grayscale’s application. If so, the regulator will need to reconsider the current application, taking into account the court’s decision. Otherwise, it could force Grayscale to reapply.
Regardless of the outcome for Grayscale, fund managers have observed that the SEC appears to have changed its stance in recent weeks.
For example, in an interview with CNBC, Ark Invest CEO Cathie Woods said that the SEC had responded to her company’s Bitcoin ETF application as recently as last week. “The fact that the SEC chose to ask questions is a change in behavior,” she remarked, alluding to the regulator’s previously bullheaded reluctance to engage with applicants.
Pointing to Ark’s January 10 deadline for a decision on its SEC filing, Woods speculated that “one or a number of Bitcoin ETFs will be approved” by the end of the year. She added that “a number of Bitcoin ETFs could be approved at the same time.”
Woods’ opinion was echoed by Michael Novogratz, the CEO of Galaxy Digital, another fund manager that is awaiting SEC approval to list a spot Bitcoin ETF. Remarking that the Grayscale victory will force the SEC to approve such investment products, Novogratz was optimistic about Galaxy’s prospects, asserting that “it’s gonna get approved this year.”
Despite rising anticipation among asset managers, SEC representatives have remained tight-lipped regarding the process of specific applications.
For the SEC, approving multiple applications together would help to mitigate accusations of favoritism. After all, even a headstart of just a few days could give fund issuers a significant advantage over their peers when it comes to meeting demand for Bitcoin-based investment products.