What’s the Impact if the SEC Doesn’t Appeal the Grayscale Spot Bitcoin ETF Ruling?

As the deadline looms for the United States Securities and Exchange Commission (SEC) to respond to the court ruling in favor of Grayscale Investments, the fate of the fund manager’s application for a spot Bitcoin fund hangs in the balance. While the conventional wisdom suggests that the SEC won’t appeal the court’s decision, experts speculate that the regulator might employ alternative tactics to delay Grayscale’s spot Bitcoin ETF conversion.

By October 13, the SEC must make a decision: appeal the D.C. Circuit Court of Appeals ruling to the U.S. Supreme Court, request a reconsideration from the Appeals Court, or adhere to the court’s August directive and assess Grayscale’s proposal to transform its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

Bloomberg ETF analyst Eric Balcunas believes an appeal is improbable, but he doesn’t rule out the possibility of other obstacles emerging, stating, “We think [an] appeal is a longshot […] But there’s always a chance of something else happening.” Fellow analyst James Seyffart echoes a similar sentiment, suggesting that while the SEC might not attempt a new denial, they could resort to methods to prolong the process, a task he describes as a “very difficult needle to thread.”

A warning from law firm Ropes & Gray suggests that the SEC might send the GBTC application back for review, allowing the regulator another opportunity to reject it based on different grounds. If this were to happen, Grayscale could appeal again, further elongating the process.

Another potential delay scenario outlined by Ropes & Gray involves the New York Stock Exchange filing a new application to list GBTC. In this situation, the SEC might take up to eight months to make a decision on the ETF.

Currently, the SEC is reviewing at least seven spot Bitcoin ETF applications, all filed earlier in 2023. However, delays and setbacks from the regulatory body have pushed most final approval deadlines to March 2024 or later.

Grayscale’s spot Bitcoin ETF conversion application is particularly significant because its approval could set a precedent for other applications. Bloomberg analysts have updated the odds of an approved spot Bitcoin ETF this year to 75% following Grayscale’s court victory, increasing to a 95% likelihood of approval by the end of 2024. The financial industry is closely watching these developments, as they could mark a pivotal moment in the mainstream adoption of cryptocurrencies within traditional financial markets.

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