SEC’s second court loss to crypto firms in so many months opens the door to much-desired Bitcoin spot ETFs, giving gives hope to the whole crypto finance sector
The SEC, represented by Gary Gensler, made itself an enemy of the crypto space by attacking and stifling it in every possible way.
Luckily, the US has a functioning system of counter-power, and this abuse is being slowly but surely dismantled in court.
🤕 In July, the SEC lost to Ripple, whose cryptocurrency is now not considered a security (partially, but still enough to mark the point).
🤕 This week, it lost to Grayscale Investments: the judge admitted that the SEC’s rejection of its Bitcoin spot ETF application was unlawful.
This is very important for the crypto industry, and here’s why 👇
Grayscale is world’s biggest crypto asset manager, with $21.5 billion of AUM. It is offering institutional and accredited investors shares in its various crypto trusts. In exchange for a hefty yearly 2% fee, the investors get an easy exposure to crypto without having to deal with any technical or accountancy issues.
To extend the offer to retail investors and more conservative institutions, Grayscale decided to convert its flagship fund – the $17 billion Bitcoin Trust – into an ETF.
❌ The SEC argued that Bitcoin trades on unregulated (by the SEC) exchanges and can therefore be prone to market manipulation, and denied the application.
Last June, Grayscale filed a lawsuit against the SEC, challenging the grounds for this rejection.
This Tuesday, the judge stated that “The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.”
Indeed, back in 2021, the SEC approved several ETFs based on Bitcoin futures regulated by the CFTC (Commodity Futures Trading Commission). These futures are traded on the CFTF-regulated Chicago Mercantile Exchange, which deprived the SEC of its main argument.
However, while the regulations may differ, from the investor’s point of view the futures ETFs are even more technically complex (and therefore risky) than spot ETFs. And the SEC is here to protect the investors, isn’t it? 🤔
The SEC has 45 days to decide whether to abide by the decision or to appeal it.
However, changing the reasoning might be catastrophic from the public point of view, showing how arbitrary the Commission really is. So it is possible that it will accept the judge’s decision to save face.
Consequently, the SEC will have to approve Bitcoin spot ETFs from the many asset managers that are waiting. This list includes, of course, the $9 trillion financial giant BlackRock, or the $4.5 trillion Fidelity.
With more clients able to safely invest in Bitcoin (even in such ideologically improper way as buying private trust shares), the demand will inevitably rise, and so will the price 📈 This week’s 6% spike is illustrating it well.
The weight of financial giants can also contribute to de-demonizing crypto in the eyes of the public.
Who knows, maybe Gary Gensler will have to look for another job soon?