The Securities and Exchange Commission (SEC) has chosen not to contest a recent court ruling that criticized its rejection of Grayscale’s bid to transform its bitcoin trust into an exchange-traded fund (ETF), a report by Bloomberg said.
This decision, if officially confirmed, holds the potential to usher in the first-ever bitcoin ETF in the United States.
The SEC allowed the deadline for appealing the court’s scathing reversal to pass without action, according to an insider familiar with the matter. The court, specifically the D.C. Circuit Court of Appeals, had ruled in August that the SEC’s denial of Grayscale’s ETF application was “arbitrary and capricious,” insisting that similar cases should be treated uniformly.
While the path forward remains uncertain, with no immediate response from SEC, attention is now on how the regulatory body will handle the next steps in Grayscale’s application process.
The SEC still holds the authority to deny the application for alternative reasons, setting the stage for potential legal challenges by Grayscale.
Grayscale, known for operating the largest cryptocurrency fund globally, has long advocated for the conversion of its closed-end fund into an ETF.
The company argues that this move would eliminate the persistent discount between the fund’s price and its underlying bitcoin holdings.
Grayscale’s ETF proposition aligns with the creation-redemption model inherent in ETF structures, allowing flexibility to meet market demand or reduce supply as needed.
The market has been closely watching this development, as Grayscale’s Bitcoin Trust (GBTC) is the largest cryptocurrency fund globally, trading at a discount to its bitcoin holdings since February 2021.
