Grayscale Investments, a leading digital asset management company, could be on the cusp of converting its Bitcoin Trust product into an exchange-traded fund (ETF) following a recent ruling by a federal appeals court. The court ordered the Securities and Exchange Commission (SEC) to overturn its previous rejection of the product, deeming it “arbitrary and capricious” and in violation of federal administrative law.
In the decision, D.C. Circuit Court of Appeals Judge Neomi Rao emphasized that agencies must treat similar cases equally, and asserted that Grayscale’s proposed bitcoin ETF is materially similar to the bitcoin futures ETFs that the SEC has already approved. The court agreed with Grayscale’s argument that its product should therefore have been approved for trading on the NYSE Arca.
This ruling comes at a time when several other institutions, including industry giants such as BlackRock, VankEck WisdomTree, and Fidelity, have also applied to sponsor spot bitcoin ETFs.
Grayscale’s Bitcoin Trust (GBTC) currently trades at a discount compared to bitcoin spot prices. However, industry analysts expect this discount to significantly shrink if the Trust is transformed into an exchange-traded product. Following the court’s decision, GBTC shares experienced a notable 16% jump in value, surpassing the 5% increase in bitcoin prices on Tuesday.