Why the Bitcoin ETF Ruling Is a Big Win

The SEC could revoke the listing it approved for bitcoin futures ETFs, given the court ruled the commission couldn't cite the potential for market manipulation while also approving bitcoin futures products, Seyffart said. He called this move unlikely.

"The second potential avenue is to deny on reasons not used before/yet," which could involve custody or settlement of bitcoin, "which is not something that futures ETFs have to worry about," he said, noting "the SEC has made a lot of noise around custodians."

Massive Victory

Attorney Jake Chervinsky, chief policy officer for the Blockchain Association, called Grayscale's victory over the SEC "massive."

"It's very rare for a federal circuit court to find that an agency has violated the (Administrative Procedure Act) by acting arbitrarily and capriciously. The D.C. Circuit just delivered a huge embarrassment for the SEC. But the ETF isn't approved yet," he tweeted.

"The D.C. Circuit soundly rejected the SEC's view that Grayscale's ETF proposal was not 'designed to prevent fraudulent and manipulative acts and practices.' The SEC has spent a full decade denying spot bitcoin ETF proposals under this reasoning. That era has now come to an end," Chervinsky said in a follow-up tweet.

"But the court didn't order the SEC to approve Grayscale's ETF proposal. It just said the SEC's analysis on the 'fraud and manipulation' issue was wrong. Now, the SEC has to go back and review Grayscale's proposal again, with the court's ruling in mind," he added.

He agreed that it's possible the SEC will pick a different reason to deny Grayscale's proposal, spurring more litigation. "It's hard to understate the extreme hostility of SEC leadership toward crypto. Will Chair Gensler really accept this loss?" Chervinsky said in another tweet.

"But another theory is that the SEC will take the D.C. Circuit's decision as a [semi-] graceful exit from their anti-ETF position. I'm in this camp. It's the right move. 'We disagree, but we're following the rule of law' is a convenient excuse to back out of a losing battle, the lawyer added, noting the commission faces political pressure to approve a spot bitcoin ETF.

Chervinsky predicted the market will eventually get a spot bitcoin ETF.

Not Just Grayscale

"Grayscale's win is a huge victory for all potential spot bitcoin ETFs — not just for Grayscale," said Roxanna Islam, associate research director at VettaFi, a major ETF research firm, in a statement. "While we will still have to wait and see how the SEC handles its execution, it is likely that they will have to approve Grayscale's spot ETF along with other pending spot bitcoin ETF filings."

Spot Bitcoin ETFs Definitely Coming

"Despite the inevitable SEC appeal, to our mind there is no doubt now, spot BTC ETFs are coming to the U.S.," Tim Bevan, CEO at crypto ETF firm ETC Group, said in a statement.

"We don't believe the SEC will act as kingmaker and the most likely outcome is a block approval of applications that meet requirements, probably in Q1'24. The level of pent up institutional and retail demand in the U.S. is significant and we expect this to have a positive impact on the price of bitcoin as can be seen from today's price reaction, as well as further accelerate the global trend towards acknowledging crypto as a new asset class."

New Pressure on SEC

Alex Adelman, CEO and co-founder of bitcoin rewards app Lolli, said the milestone decision suggests bitcoin ETF approvals may be coming soon from the SEC.

"The SEC's failure to provide clear, transparent explanations for selectively rejecting and approving materially similar bitcoin-based financial products has created frustration and confusion in the industry, while stagnating growth and innovation," he said in a statement.

"The ruling will put new pressure on the SEC to be transparent in sharing coherent explanations on its approval process, and help pave the way for products that will make bitcoin accessible to mainstream investors," he added.

Spot bitcoin ETFs have seen accelerated listings in the EU and elsewhere, Adelman noted, adding that now is the time for the U.S. to make bitcoin available to investors or risk falling behind global powers that already have done so, he added.

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