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Jake Chervinsky@jchervinsky · Aug 29, 2023

1/ Grayscale's victory over the SEC is *massive.* It's very rare for a federal circuit court to find that an agency…

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Summary

Grayscale won a major court victory against the SEC over its spot bitcoin ETF proposal, with the DC Circuit ruling the SEC acted arbitrarily in rejecting it. While the court didn't approve the ETF yet, it forces the SEC to reconsider, and political and legal pressure suggests a spot bitcoin ETF approval is likely coming soon.

Summarized by ThreadOut AI from the full thread. May miss nuance — read the thread below.

  1. #1

    1/ Grayscale's victory over the SEC is *massive.* It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously. The DC Circuit just delivered a huge embarrassment for the SEC. But the ETF isn't approved yet 🧵

  2. #2

    2/ The DC Circuit soundly rejected the SEC's view that Grayscale's ETF proposal was not "designed to prevent fraudulent and manipulative acts and practices." The SEC has spent a full decade denying spot bitcoin ETF proposals under this reasoning. That era has now come to an end.

  3. #3

    3/ But the court didn't order the SEC to approve Grayscale's ETF proposal. It just said the SEC's analysis on the "fraud and manipulation" issue was wrong. Now, the SEC has to go back and review Grayscale's proposal again, with the court's ruling in mind. What will the SEC do?

  4. #4

    4/ One theory is that the SEC will just pick a different reason to deny Grayscale's proposal and force more long and costly litigation. That's possible. It's hard to understate the extreme hostility of SEC leadership toward crypto. Will Chair Gensler really accept this loss?

  5. #5

    5/ But another theory is that the SEC will take the DC Circuit's decision as a (semi-)graceful exit from their anti-ETF position. I'm in this camp. It's the right move. "We disagree, but we're following the rule of law" is a convenient excuse to back out of a losing battle.

  6. #6

    6/ There will also be political pressure on the SEC to approve spot bitcoin ETFs. This isn't just about Grayscale. All of TradFi is ready for a bitcoin ETF. Many other issuers have proposed ETFs this year, including Blackrock, and Larry Fink throws heavy punches in DC.

  7. #7

    7/ Chair Gensler can also spin a face-saving narrative out of a spot bitcoin ETF approval. The SEC has been getting blasted for its regulation-by-enforcement approach to crypto. Here's a chance to say "look, we aren't anti-crypto! we're willing to approve the right products!"

  8. #8

    8/ I have no doubt that we'll get a spot bitcoin ETF sooner or later. The only question is if the SEC wants to make this more painful for itself. Trust me, if there's another denial, there will be another lawsuit. I strongly recommend the SEC picks "sooner." Let's see. [end]