After Grayscale’s landmark court victory over the SEC, CEO Michael Sonnenshein took a victory lap.
“Huge win for Grayscale, huge win for our investors—and really the crypto and investment community as a whole,” he said Wednesday morning in a TV interview with Bloomberg News.
On Tuesday, the U.S. Court of Appeals for the D.C. Circuit sided with Grayscale in its more-than-year-long case with the Securities and Exchange Commission in which it claimed that the federal agency had unreasonably denied its request to create a spot Bitcoin ETF. The court found that the SEC could not reasonably explain why it denied Grayscale’s request to convert its Grayscale Bitcoin Trust digital asset investment product into a spot Bitcoin ETF after already approving Bitcoin futures products.
Crypto advocates celebrated the ruling as a rare bright spot amid the lingering bear market. News of the decision fueled a 6% jump in the price of Bitcoin, the most popular cryptocurrency, on Tuesday. It was trading at around $27,000 on Wednesday afternoon.
Sonnenshein said in the interview that the court’s decision vacated the SEC’s denial of its GBTC application to create a spot Bitcoin ETF. He pointed out that the SEC has 45 days to request a rehearing, but following that period there will be a final mandate from the court.
Despite increased competition from BlackRock and Fidelity over spot Bitcoin ETFs, Sonnenshein said he didn’t see a need for a surveillance-sharing agreement when it comes to GBTC—an approach considered by peers—although a court ultimately could require one.
“The court agreed with us,” Sonnenshein continued, “that the arguments we’ve been putting forward all along throughout this process are such that the SEC already has the tools it needs to approve spot Bitcoin products like GBTC.”
Sonnenshein added that Grayscale will lower fees for GBTC once it’s converted to an ETF, which he said the company is working with the SEC to accomplish “expeditiously.” GBTC charges a fee of 2%, much higher than the average fee of 0.54% across other ETFs, according to Bloomberg Intelligence.
Following the landmark decision on Tuesday, Eric Balchunas, a senior ETF analyst for Bloomberg, wrote in a post on X (formerly Twitter) that he and fellow Bloomberg analyst James Seyffart believed the odds of the SEC approving a spot Bitcoin ETF by the end of the year had risen to 75%—and to 95% by the end of 2024.
NEW: @JSeyff & I are upping our odds to 75% of spot bitcoin ETFs launching this yr (95% by end of '24). While we factored Grayscale win into our prev 65% odds, the unanimity & decisiveness of ruling was beyond expectations and leaves SEC w "very little wiggle room" via @NYCStein pic.twitter.com/IyEGmWjuHa
— Eric Balchunas (@EricBalchunas) August 30, 2023
The marketplace entry of a spot Bitcoin ETF, which allows investors to put money into the cryptocurrency directly without owning it, has the potential to supercharge crypto markets with billions of dollars in liquidity. But that’s also led to some concerns over whether TradFi giants might use their outsize influence to push for changes in the crypto space.
