In a pivotal turn for the Bitcoin industry, the U.S. Court of Appeals for the D.C. Circuit has given the green light for bitcoin exchange-traded funds (ETFs), taking a positive stance on the matter. The court’s decision could be a game-changer, as it paves the way for traditional investors to access the world’s most prominent cryptocurrency more effortlessly.
Grayscale Triumphs Over SEC:
On Tuesday, Grayscale, the entity behind the world’s most significant crypto fund, emerged victorious against the Securities and Exchange Commission (SEC). The litigation revolved around the SEC’s previous denial of Grayscale’s plea to transform its Grayscale Bitcoin Trust, commonly recognized by its ticker GBTC, into an ETF. The court’s endorsement of this transformation might set a precedent for other industry giants like BlackRock and Fidelity, who have shown interest in creating similar bitcoin ETFs.
A Breakthrough for Mainstream Adoption:
Spot bitcoin ETFs, unlike their futures counterparts, will be anchored directly by bitcoin holdings under a brokerage’s management. This means that traditional investors can reap the rewards of the surging cryptocurrency market without the intricacies of direct coin ownership. Advocates of cryptocurrency assert that the establishment of a spot bitcoin ETF will be the catalyst for more widespread institutional adoption.
Coinbase, a dominant player listed as the custodian partner in numerous spot bitcoin ETF applications, saw its stock prices soar by over 14% following the news.
Court Highlights Inconsistent SEC Behavior:
Addressing the issue, the court stated, “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP.” They further added that the inconsistent regulatory treatment of similar products without a logical explanation is deemed unlawful.
Grayscale’s Journey to ETF:
Grayscale Investments commenced its legal battle with the SEC in June 2022 after the regulatory body declined its application for a direct bitcoin-backed ETF. The company’s keen interest in establishing an ETF was further fueled when the SEC greenlit ProShares’ futures-based bitcoin ETF in October 2021.
Despite multiple delays, the SEC’s final verdict last summer rested on Grayscale’s alleged inability to address concerns about potential market manipulation and safeguarding investors.
Responding to the recent turn of events, the SEC stated they are “reviewing the court’s decision to determine next steps.”
Conveying the sentiment of many, a Grayscale representative remarked that Tuesday’s ruling marked “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
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