The Securities and Exchange Commission has no plans to challenge a major court loss against Grayscale Investments, bringing the possibility of the first Bitcoin exchange-traded fund closer, according to a person familiar with the matter.
The agency had to request a new hearing in its case against Grayscale Investments at midnight on Friday. In that case, a panel of judges said the SEC acted arbitrarily and arbitrarily when it rejected the company’s offer to convert the Grayscale Bitcoin Trust (ticker: GBTC) into an ETF.
The SEC had argued that Bitcoin trading platforms were not adequately monitored to detect fraud and manipulation, but judges at the US Court of Appeals for the D.C. Circuit agreed with Grayscale that the argument made no sense given the agency’s approval of the exchange. traded products containing Bitcoin futures.
The three judges agreed in their decision, but the SEC still had the option of requesting an “en banc” hearing before all appeals court judges. The SEC will not take that step, the person said.
Currently, the Grayscale Trust trades like a closed-end fund, whose price differs significantly from the value of the Bitcoins it holds. At Friday’s close, the trust was priced at $20.24, about 15.9% below the value of its assets. If the trust is converted, this discount will likely be eliminated.
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Additionally, this move is perhaps the strongest indication yet that the agency is getting closer to launching spot Bitcoin ETFs. Companies such as BlackRock (BLK), Fidelity Investments and Invesco (IVZ) have filed to launch Bitcoin ETFs.
The SEC could still choose to deny Grayscale’s application for another reason that the court did not address. Grayscale and other fund firms also have to obtain other approvals to bring a product to market.
But Friday’s decision is a crucial signal that Bitcoin ETFs are nearing the finish line.
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Write to Joe Light at [email protected]