How Much Time Does the SEC Have to Appeal the Spot Bitcoin ETF Decision in the Grayscale Case?

• The U.S. Securities and Exchange Commission (SEC) has one week left to appeal the court decision in the case involving Grayscale Investments.
• Pantera Capital executives stated in a letter sent to investors last month that the likelihood of going to the Supreme Court is improbable.
• Sam Kerbage, Chief Investment Officer at Hashdex, said that the “most likely route” is for the SEC to request a new proposal from Grayscale and reject it for a different reason.

The U.S. court ordered the SEC to review Grayscale’s application for a spot Bitcoin ETF; will the SEC appeal this decision?

SEC’s Deadline for Appeal Approaches

The U.S. Securities and Exchange Commission (SEC) has one week left to appeal the court decision in the Grayscale Investments case, and the regulator’s decision could provide advance notice of the fate or at least the possible launch date of spot bitcoin ETFs.

Observers in the segment said that the SEC appealing would be a bad sign for Bitcoin ETF approval dates, but many expect the SEC not to appeal. Regardless of the Commission’s choice, a consensus among industry observers is that Bitcoin ETFs will ultimately trade.

When the D.C. Circuit Appeals Court judges determined that the SEC approving bitcoin futures ETFs before approving the proposed conversion of Grayscale Bitcoin Trust (GBTC) into an ETF was “arbitrary and capricious,” an SEC spokesperson at the time said, “We are reviewing the court’s decision and determining next steps.” Following the decision, Grayscale Investments stated in a statement that they would “work closely with the SEC” to bring GBTC to NYSE Arca as a spot Bitcoin ETF.

The deadline for the SEC to appeal the decision is October 13th. If a higher court requests an appeal, it could either file a petition for certiorari with the U.S. Supreme Court or request a review of the decision by the Appeals Court’s “en banc” panel.

Pantera Capital executives stated in a letter sent to investors last month that the route to the Supreme Court is improbable and noted that “this case is not a significant legal issue.”

If the SEC chooses not to appeal, a court order is expected to determine the next steps. This could include “requesting the SEC to approve the application or reject Grayscale’s application for other reasons,” according to a blog post by law firm Winston & Strawn.

Compass Point Research & Trading analysts Chase White and Joe Flynn stated in a research note on Friday that an en banc case or a certiorari application is “almost nil.” However, even if the SEC chooses not to appeal, White and Flynn said they could still “try to play an obstructive role.”

Matteo Greco, an analyst at Fineqia International, commented, “The need for an appeal, as in the Ripple case, could be less convincing because it is a definitive decision with important consequences for the legal classification of digital assets, so the SEC may reject the conversion for different reasons.”

When and How Are ETF Launches Decided?

Sam Kerbage, Chief Investment Officer at Hashdex, said that the “most likely route” is for the SEC to request a new proposal from Grayscale and reject it for a different reason.

The 240-day window for the SEC to evaluate a proposed spot bitcoin ETF by Ark Invest expires on January 10th. The deadline for making decisions on other proposals is approximately two months away.

Alex Thorn, President of Galaxy Digital, said, “If spot BTC ETF applications like this are to be approved, there is a widespread belief that it will likely happen on or before January 10th, given the perceived inconsistency between denial in January and approval in March.”

Bloomberg Intelligence analysts said they believe there is a 75% chance that the SEC will approve a spot bitcoin ETF by the end of 2023 following the Grayscale decision. However, they said these approval odds increase to 95% by the end of 2024.

White and Flynn noted in their Friday notes, “Our base scenario remains that the SEC will begin approving ETFs in early 2024, but we acknowledge that this is only by a thin margin, given Gensler’s consistent anti-crypto stance.”

Due to the uncertainty surrounding the SEC’s next move, Joel Kruger, market strategist at LMAX Group, argued that momentum is in favor of crypto. Kruger said, “The bigger point to be drawn from here is that the story of crypto pushing its way in favor continues” and added, “We have seen increasing acceptance and understanding of the value proposition of digital assets by the public and legislators in recent months.”