Grayscale Investments Triumphs in Landmark Legal Battle Against SEC, Paving the Way for Crypto ETFs

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Grayscale Investments recently won a big legal battle against the SEC, which is a crucial step toward allowing cryptocurrency exchange-traded funds (ETFs). This ruling isn’t just about Grayscale’s Bitcoin Trust (GBTC); it sets rules for how regulators should handle future crypto ETF applications. Gautam Chhugani, a digital asset expert at Bernstein, highlighted how important this is for the entire crypto industry.

He said that the crypto market can be quite bumpy. For instance, when Grayscale had good news, Bitcoin’s price shot up by 6%, but it quickly fell when the SEC delayed a Bitcoin ETF decision. This shows how the crypto market is still pretty shaky and not very stable. 

He wrote, “The market initially rallied on the Grayscale news with Bitcoin up 6%, but as the SEC delayed the first Bitcoin ETF decision, gave up all the gains. The existing crypto market remains a low liquidity market, with limited new capital entering the space. As a result, traders position around events and sell the good news.”

However, he added that this doesn’t mean crypto isn’t progressing. Recent legal wins, like Ripple and Grayscale cases in just two months, along with better chances for ETFs and more big institutional investors, show that things are changing from the way crypto worked in the past when regular people were the main players.

Last week, a judge told the SEC to review Grayscale’s request to change their Grayscale Bitcoin Trust into a regular Bitcoin ETF. Grayscale sued the SEC in June 2022, saying the SEC unfairly rejected their ETF application. The judge said the SEC needs to reexamine Grayscale’s request to be fair and consistent and avoid making random decisions.

He added, “The strong showing in the courts (Ripple and Grayscale in two months), improved ETF chances and the progressive institutional interest, is in contrast to the retail-led crypto cycles of the past. This is a cycle slower to take off, but is being laid on much stronger fundamental grounds of regulatory clarity and more strategic long-term players entering the space.”