U.S. Court of Appeals Reaffirms Ruling on Grayscale’s GBTC to Bitcoin ETF Conversion

The U.S. Court of Appeals for the D.C. Circuit issued a formal mandate, cementing its August decision, which had directed the Securities and Exchange Commission (SEC) to reconsider Grayscale Investments’ proposal to convert its flagship Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin Exchange-Traded Fund (ETF). The ruling has been closely monitored by both the crypto community and financial market enthusiasts, as it could pave the way for increased accessibility to Bitcoin investments for traditional investors.

The Court’s recent move comes as no surprise, as it aligns with the widely anticipated outcome following the SEC’s announcement last week that it had chosen not to appeal the ruling. This decision indicated that the SEC acknowledged the need to reevaluate its stance on the GBTC conversion.

While Grayscale seized the opportunity by submitting a new registration statement last Thursday through an S-3 filing, a shortened version of the typical S-1 filing commonly used to issue new shares, it remains uncertain if the SEC may attempt to challenge the application on different grounds. Grayscale’s proactive approach in swiftly submitting a fresh filing suggests their commitment to converting GBTC into an ETF, but the final decision still lies with the SEC.

The formal mandate issued on Monday states, “In accordance with the judgment of August 29, 2023, and pursuant to Federal Rule of Appellate Procedure 41, this constitutes the formal mandate of this court.” This mandate essentially reaffirms the court’s August ruling, which centered on the SEC’s treatment of spot Bitcoin ETFs and Bitcoin futures ETFs.

In the August ruling, the court emphasized that Grayscale’s proposed Bitcoin ETF was analogous to already-approved Bitcoin futures ETFs and should, therefore, have “the same likelihood of detecting fraudulent or manipulative conduct in the market for Bitcoin and Bitcoin futures.” This argument presents a strong case for Grayscale’s bid to convert GBTC into a spot Bitcoin ETF and has likely played a significant role in the court’s decision.

Looking forward, Grayscale’s next steps are of great interest to investors and the cryptocurrency community. The company has expressed its intention to list the shares on the New York Stock Exchange Arca (NYSE Arca) under the symbol GBTC, contingent on the approval of its S-3 filing and a separate 19b-4 filing from NYSE Arca. If these approvals are granted, it would mark a significant milestone in the evolution of cryptocurrency investment opportunities, as traditional investors gain easier access to the world’s most prominent digital asset.

In conclusion, the U.S. Court of Appeals for the D.C. Circuit’s recent formal mandate, reiterating its August ruling, marks another step towards opening the doors to a spot Bitcoin ETF. Grayscale’s proactive stance in resubmitting its application demonstrates their determination to push forward with the conversion of GBTC, setting the stage for a potential transformation in the cryptocurrency investment landscape.

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