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There are several options in front of the SEC, and choosing one seems to be a matter of time. The calendar is clear, and possible scenarios will directly affect the market. As we have mentioned many times before, the Grayscale case was the biggest obstacle in front of the SEC’s Spot Bitcoin ETF. This obstacle has been eliminated, moreover, with a decision that will increase the likelihood of approval.
SEC’s Approval of Spot Bitcoin ETF
With Grayscale Investments winning the case, the U.S. Securities and Exchange Commission is now cornered. What will they do next? Instead of making lengthy explanations to summarize the current situation, we can consider the key points in bullet points.
- The SEC clearly lost the case with the statement that all three members were wrong.
- If the SEC wants to reject ETF applications, they have to find other reasons that they have not yet voiced.
- There is a problem; the SEC’s excuses should not contradict the approvals they have given for futures-based ETFs in 2021 and beyond. How will the SEC do this? Manipulative markets, price volatility, risks, and all the excuses they have mentioned so far are no longer valid.
- After this stage, the SEC has four options. They can appeal the decision, approve the ETFs, look for new reasons for rejection, or finally do nothing.
- If the SEC does not approve the ETFs, all applications will be automatically approved in March (since no rejection decision has been made).
- The SEC has 44 days left for appeal and needs to find a valid reason. But look, the case was very clear. So it doesn’t seem possible for the SEC to find an argument that will convince the court.
Expert Comments
Pat Daugherty, a former SEC lawyer representing crypto clients at Foley & Lardner, said:
“These are not the words that ‘arbitrary and capricious’ Gary Gensler should hear from federal courts, but that’s what the panel of judges who unanimously decided on the agency’s decision called it. The SEC could not explain why it could approve ETFs based on Bitcoin futures but not a Bitcoin-based ETF. They lost because similar cases in America should be treated the same way.”
Daughtery, who also teaches crypto and ETF innovation at Cornell Law School, said:
“After losing this case, it would be wise for the SEC to quickly approve Grayscale’s application. Will President Gensler backtrack and change his course? Perhaps a few Democrats on Capitol Hill will convince him.”
Justin Slaughter, who worked at the SEC and is currently the policy director at Paradigm, said:
“I have never seen a financial regulator’s decision (as it was in Grayscale, being slapped by a bipartisan panel consisting of a moderate, a conservative, and a progressive) being overturned. The SEC has restored bipartisanship in DC.”
Finally, Dave Weisberger, the co-founder and CEO of CoinRoutes, said:
“Although the SEC cannot guarantee the approval of Grayscale’s Bitcoin ETF, it is likely that they will approve all ETF applications they believe have sufficient information sharing agreements from Blackrock and Fidelity.”
Now, on Friday, the SEC will decide on 7 ETFs. It may be logical to have another postponement decision on top of the case. However, rejection seems risky for the SEC at the moment.
