SEC Bitcoin ETF Decision Appeal: What Happens Next

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The United States Securities and Exchange Commission faces a critical decision regarding Grayscale’s recent triumph in a D.C. Appeals Court on October 13. Failure to appeal by this deadline compels the SEC to either endorse or attempt to postpone Grayscale’s Bitcoin ETF bid.

The impending deadline requires the SEC to challenge the court’s ruling favoring Grayscale Investments. This forces the regulatory body into the evaluation of the fund manager’s application for a Bitcoin fund.

While some anticipate the SEC refraining from appealing, analysts posit alternative routes for the SEC to potentially defer the approval of Grayscale’s spot Bitcoin ETF conversion.

On October 13, the SEC confronts pivotal choices: to appeal the D.C. Circuit Court of Appeals decision to the U.S. Supreme Court, petition the Appeals Court for a reassessment of its ruling, or adhere to the court’s August directive to scrutinize Grayscale’s proposal to transform its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

Addressing a user’s query on October 12, Bloomberg ETF analyst Eric Balchunas expressed skepticism about an appeal, hinting at potential hurdles. He stated, “We think [an] appeal is a longshot […] But there’s always a chance of something else happening.”

In a separate post, fellow Bloomberg ETF analyst James Seyffart opined that an SEC denial on new grounds is unlikely, characterizing it as a “very difficult needle to thread.” Nevertheless, he suggested the SEC might “find ways to keep delaying.”

A cautionary note from the law firm Ropes & Gray in September outlined a scenario where the GBTC application could return to the SEC for review, providing the regulator with another opportunity for rejection on different grounds. The firm remarked, “In this scenario, the new denial could itself then be subject to another appeal by GBTC to the D.C. Circuit.”

Ropes & Gray also presented another delay scenario, suggesting that if the New York Stock Exchange initiates a new filing to list GBTC, the SEC might take up to eight months to reach a decision on the ETF.

Currently, the regulator has before it at least seven spot Bitcoin ETF applications. Despite all filings occurring earlier in 2023, they have encountered delays and resistance from the SEC, setting most final approval deadlines for around March 2024 or later.

The spotlight, however, remains on Grayscale’s spot Bitcoin ETF conversion application. Approval of this could potentially complicate the SEC’s stance in rejecting other applications.

Bloomberg analysts, after Grayscale’s court victory, estimate a 75% likelihood of an approved spot Bitcoin ETF this year. These odds surge to 95% by the end of 2024.

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