Grayscale’s Court Win Over SEC Lifts Hopes for Bitcoin ETF Approval

A federal appeals court ruled Tuesday that the Securities and Exchange Commission must reconsider crypto asset manager Grayscale Investments’ application to launch the first bitcoin exchange-traded fund, the latest setback for SEC Chair Gary Gensler’s efforts to regulate the upstart industry.
Bitcoin-related assets surged on the news, which traders were betting would pave the way for broad investor adoption of ETFs backed by bitcoin rather than futures. 

Coinbase Global, the largest publicly traded crypto exchange, rose 14%, and bitcoin futures rose 6%.

“The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” Circuit Judge Neomi Rao wrote on behalf of the court, noting that the SEC has approved bitcoin futures ETFs. The ruling was unanimous in a panel of three judges, two of whom were appointed by Democrats.

The decision by the U.S. Court of Appeals for the D.C. Circuit marks the latest legal setback to Gensler’s approach to regulating crypto markets. The agency had denied Grayscale’s application to convert its bitcoin trust, known as GBTC, into an ETF on the basis that spot markets for bitcoin are unregulated and subject to market manipulation.