Crypto community jubilant over Grayscale decision, but uncertainty remains

The crypto community received the decision it had been hoping for when the District of Columbia Circuit Court of Appeals ruled on Grayscale Investments’ Bitcoin spot ETF application. The United States Securities and Exchange Commission (SEC) rejection of the application was overturned.

The decision was “a slaughterfest of the SEC arguments,” Cinneamhain Ventures founder Adam Cochran said on X (formerly Twitter). “This changes everything. Time to pay attention again,” influencer Miles Deutscher chimed in.

The initial enthusiasm was tempered by the understanding that the decision was limited in its scope and the SEC has options for its next steps. Grayscale released a statement in which chief legal officer Craig Salm said:

“We appreciate that the D.C. Circuit’s opinion acknowledged that this case presented a straight-forward question about equal treatment under the law.”

This more sober evaluation gained traction as analysts considered the SEC’s resourcefulness further.

“Gary Gensler and team are discussing how this can [be] made into a political win. […] Will Gensler graciously accept defeat or talk about how these 3 judges got it wrong?” crypto lawyer John Deaton asked. 

Related: BTC price jumps to 2-week highs on Grayscale vs. SEC Bitcoin ETF win

Blockchain Association chief policy officer Jake Chervinsky acknowledged the possibility that the SEC would accept defeat, calling that strategy “a face-saving narrative” and “the right move” after “a huge embarrassment.”

1/ Grayscale’s victory over the SEC is *massive.*

It’s very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.

The DC Circuit just delivered a huge embarrassment for the SEC.

But the ETF isn’t approved yet

— Jake Chervinsky (@jchervinsky) August 29, 2023

Others were less optimistic. “So far, every time they lose in court they just shamelessly say the judge got it wrong and pursue more shenanigans,” Delphi Labs general counsel Gabriel Shapiro said. 

if a court finds that the government acted arbitrarily and capriciously it should have to pay the other side’s legal fees — if not, there’s no consequence for bad government behavior.

— Palley (@stephendpalley) August 29, 2023

Shenanigans can be costly. “For many companies, fighting back is incredibly expensive (you will win, but you’ll be bankrupt when you do) or you’re a financial conglomerate where the SEC can fuck up the rest of your…