Critical Day: What Happens If the SEC Doesn’t Appeal the Spot Bitcoin ETF Decision in the Grayscale Case?

• The United States Securities and Exchange Commission (SEC) is nearing the deadline to appeal the court decision in favor of Grayscale Investments.
• In response to a user’s question on October 12th, Bloomberg ETF analyst Eric Balchunas said that an appeal is unlikely but noted that there could still be other obstacles.
• In a note from the Ropes & Gray law firm in September, there was a warning that there might be a possibility of the GBTC application being sent back to the SEC, giving the regulator a chance to reject it on different grounds.

If the SEC doesn’t appeal the court’s decision regarding the Grayscale spot Bitcoin ETF, what will happen? Today is the last day; here are the possible scenarios!

Final Day for SEC to Appeal ETF Decision

The United States Securities and Exchange Commission (SEC) is nearing the deadline to appeal the court decision in favor of Grayscale Investments. This situation puts pressure on the regulator to review the fund manager’s application for converting its spot Bitcoin fund.

While many observers don’t believe the regulator will appeal the court’s decision, analysts suggest there could be other ways for the SEC to delay the approval of Grayscale’s spot Bitcoin ETF.

On October 13th, the SEC must choose one of the following options: appeal the D.C. Appeals Court decision to the U.S. Supreme Court, request the Appeals Court to reconsider its decision, or follow the court’s August order and review Grayscale’s application to convert Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

In response to a user’s question on October 12th, Bloomberg ETF analyst Eric Balchunas said an appeal is unlikely but noted that other obstacles could still arise:

“We think the odds of an appeal are very low […] but there is always the chance something else could happen.”

Meanwhile, another Bloomberg ETF analyst, James Seyffart, stated that the likelihood of the SEC attempting a rejection with new reasons is low and it would be “like threading a very tough needle,” but the SEC could “find ways to kick the can further down the road.”

In a note from the Ropes & Gray law firm in September, there was a warning that there might be a possibility of the GBTC application being sent back to the SEC, giving the regulator a chance to reject it on different grounds. The firm wrote: “In this scenario, the new rejection itself could later be appealed by GBTC to the D.C. Appeals Court.”

According to Ropes & Gray, another delay scenario could emerge if the New York Stock Exchange needs to file a new application to list GBTC, in which case it might take the SEC up to 8 months to make a decision on the ETF.

SEC Continues to Delay ETFs

There are currently at least 7 spot Bitcoin ETF applications in front of the regulator for approval. Despite all applications submitted to the regulator in early 2023, they all faced delays and withdrawals from the SEC, leaving most of them with approval dates around March 2024.

However, most eyes are on Grayscale’s Bitcoin ETF conversion application because if the SEC approves it, the regulator might find it difficult to find reasons to withdraw approval for other applications. According to updated probabilities by Bloomberg analysts, the likelihood of a spot Bitcoin ETF being approved this year is 75%. After Grayscale’s court victory, the odds of approval by the end of 2024 increase to 95%.