Is the SEC buying time while it deals with Grayscale troubles? | Credit: Shutterstock
Key Takeaways
- The SEC postponed responses to seven ETF applications.
- BlackRock’s application among those postponed.
- SEC might be buying time to deal with Grayscale legal proceedings.
The US Securities and Exchange Commission (SEC) decided to delay its response to several ETF applications from Wall Street giants such as BlackRock and Fidelity.
The SEC bought time as it also has nearly 40 days to file for a rehearing of a lawsuit launched by Grayscale in which judges ruled against the regulating body, stating its response to the company’s ETF was “arbitrary and capricious”.
ETF Applications Delayed
“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the Commission, designates October 17, 2023, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change,” reads the SEC’s filing .
The regulating body has pushed back deadlines for seven ETF applications filed by BlackRock, Fidelity, Valkyrie, Invesco and others.
UPDATE (Aug. 31, 2023, 19:42 UTC): Adds Valkyrie’s application as one of those delayed.
UPDATE (Aug. 31, 20:11 UTC): Adds Wise Origin delay.
UPDATE (Aug. 31, 20:16 UTC): Adds VanEck delay.
UPDATE (Aug. 31, 20:46 UTC): Updates to say decision for all of the ETF applications are delayed.
SEC Deals With Grayscale
In the meantime, the SEC has 45 days to file an appeal in a lawsuit with Grayscale, the digital asset manager that attempted to convert its Bitcoin Trust (GBTC) into a spot ETF.
Grayscale landed a momentous win against the regulating body when a 3-judge panel in the US District Court ruled the commission was at fault for rejecting Grayscale’s application without providing proper reasons.
Grayscale initiated GBTC in 2013, then filed for a spot ETF in 2021. The SEC took over a year to respond to Grayscale’s application, rejecting it without providing a clear statement behind the decision.
Grayscale promptly filed a lawsuit against the regulating body, claiming its decision was “arbitrary and capricious”.
At the end of the 45 days, should the SEC fail to file for an appeal with the US District Court, the commission would be urged to properly review Grayscale’s application.
The ruling also establishes a precedent for Wall Street giants like BlackRock and their adjacent ETF applications. If Grayscale secures this ruling, other applicants could demand equal treatment, preventing the SEC from rejecting ETF applications arbitrarily.
Wall Street Waits Patiently
Crypto market was shocked as BlackRock, the world’s biggest asset manager, filed for a Bitcoin spot ETF, which pushed the Bitcoin up by $4,000, and a wave of financial institutions filed for similar ETFs.
BlackRock opted to refile its ETF application with a surveillance sharing agreement (SSA), naming Coinbase as a surveillance partner, to meet the commission’s anti-money laundering conditions.
Other financial institutions made the same move, such as Cathie Wood’s ARK Invest, which filed for an ETF prior to BlackRock’s application.
While Wood had initially believed her company would have been the first to get an ETF, she now believes the commission will approve a handful of applications in one go.
