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U.S. Court of Appeals Clears Path for Bitcoin ETFs, Ruling Favors Grayscale Over SEC

The U.S. Court of Appeals for the D.C. Circuit has ruled in favor of Grayscale in a lawsuit against the Securities and Exchange Commission (SEC), allowing the company’s application to convert the Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). This decision could have significant implications for other companies, such as BlackRock and Fidelity, that are seeking to create bitcoin ETFs.

The court’s decision challenges the SEC’s denial of Grayscale’s application, citing the agency’s failure to provide a clear rationale for approving some bitcoin-related products, like futures-based ETFs, while denying Grayscale’s proposal. This ruling could open the door for spot bitcoin ETFs, which would allow investors to gain exposure to bitcoin’s price movement without owning the actual cryptocurrency.

The ruling prompted positive market reactions, with major cryptocurrencies like bitcoin and ether experiencing surges. Coinbase, which is involved in several spot bitcoin ETF applications, also saw its stock price rise by over 14%.

Grayscale’s lawsuit was initiated in 2022 after the SEC rejected its application to convert GBTC into an ETF. The SEC had expressed concerns about market manipulation and investor protections. The court’s decision implies that the SEC’s enforcement action against Grayscale’s application might not have a strong foundation for success.

Experts suggest that the ruling could influence the SEC to approve more bitcoin ETF applications, potentially benefiting companies like BlackRock and Fidelity. The verdict indicates that the court sees the regulatory treatment of similar products as inconsistent and potentially unlawful.

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