The Real Reasons the Grayscale Bitcoin ETF Decision Matters

The U.S. is one step closer to having a spot marketbitcoin exchangetraded fund (ETF), the holy grail of white glove crypto financial products. On Tuesday, a three-judge panel for the U.S. Court of Appeals delivered a crushing interpretation of the Securities and Exchange Commission’s logic for denying an ETF, finding the agency acted “capriciously” and “arbitrarily.”

That’s what crypto folk have been saying for years!

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In particular, the District of Columbia Court of Appeals sided with Grayscale Investments (disclosure: CoinDesk’s sister company) in its pursuit to transition the massive Grayscale Bitcoin Trust (GBTC) into an ETF. More precisely: The judges granted Grayscale’s petition for review, meaning the SEC will have to review Grayscale’s previously rejected ETF application and maybe come up with better reasons for denying it again.

Crypto is salivating not only over the court’s pro-ETF ruling, but anti-SEC comments. The top U.S. securities regulator fell “short of the standard,” made “unexplained” calls and “failed to adequately explain” its argument. In particular, the SEC didn’t make a good enough case for approving some bitcoin-related exchange-traded products (namely futures-based products), and not others.

See also: Bitcoin Jumps 5% on Grayscale Ruling, While Crypto-Related Stocks Soar More Than 10%

Further, the SEC seemed unwilling to listen to the facts, like that spot and futures bitcoin markets are 99% correlated and so the concerns it has raised to reject 100% of spot market ETF filings don’t make sense. What this means for the existing round of ETF applications is unknown, which mostly filed in a rush after BlackRock unexpectedly threw its hat in the ring.

For many the idea the SEC’s crypto policies are divorced from reality will be obvious. The agency has for years been unwilling to consider the merits of blockchain as it exists, and what decentralization means for standing U.S. laws. (Not that skepticism over crypto’s claims of decentralization isn’t warranted at this point.) But here is a clear-as-day ruling showing bias.

And so what happened today is important…