Grayscale ETF Case's Final Word Coming in Federal Court as SEC Loss Formalized

• A federal court is poised to formalize Grayscale's win against the Securities and Exchange Commission on the dispute over a spot bitcoin ETF application.
• It's unclear whether the court will direct the SEC toward any specific timeline to govern its next steps in rethinking the application.

Grayscale Investments is waiting for a federal court tomorrow or soon after to formalize the defeat it handed the U.S. Securities and Exchange Commission (SEC) two months ago in the parties’ dispute over a spot bitcoin exchange traded fund (ETF). That federal court action will close the case, legally setting Grayscale's win in stone.

According to procedure in such cases, the D.C. Circuit Court of Appeals had seven days to close the books on this matter after the SEC chose last week not to appeal the court's ruling that the agency must scrap its rejection of Grayscale's ETF application. That deadline is arriving on Friday, and there are a couple of possibilities for what the court does next: It can just terminate the case without comment, or it could issue some further direction to the SEC on what comes next.

That's the sticking point in this eagerly watched legal dispute. Consequential uncertainties remain over what happens now with Grayscale's application. The SEC could technically seek to reject it again for different reasons, or the regulator could give in and approve this and other ETF applications, such as those from financial giants BlackRock and Fidelity.

The industry generally expects the SEC to allow the new ETFs, though timing – be it later this year or sometime in 2024 – is uncertain. If approved, Grayscale would convert its Bitcoin Trust (GBTC) to an exchange-traded product. The company plans to list that on NYSE Arca, where the ETF would become widely available to investors.

The court's final action could come on the deadline day of Friday, though it may also emerge on Monday because of the late midnight deadline, according to a person familiar with the case.

"Grayscale remains operationally ready to convert GBTC to an ETF, and on behalf of GBTC's investors, we look forward to working collaboratively and expeditiously with the SEC on these matters," spokeswoman Jennifer Rosenthal said in a statement.

Earlier today, the company filed a registration statement with the SEC to list shares of GBTC on the exchange. While the statement – known as the SEC's Form S-3 – has been filed, it's not yet effective as Grayscale awaits word from the agency.

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