• Grayscale Investments LLC participated in oral arguments before the United States Court of Appeals for the DC Circuit seeking to convert its popular Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF).
• The three presiding judges questioned the SEC’s Senior Counsel Emily Parise about why the SEC denied previous attempts of introduction of a spot bitcoin ETF.
• In response, the SEC stated that correlation does not equal causation and that it needs more empirical evidence to be sure that it can rely on CME future surveillance to approve a spot ETF.
Grayscale Arguing for Spot Bitcoin ETF
Grayscale Investments LLC participated in oral arguments on Tuesday before the United States Court of Appeals for the DC Circuit in relation to its attempts to get its popular Grayscale Bitcoin Trust (GBTC) converted to a spot bitcoin exchange-traded fund (ETF). Grayscale is suing the U.S. Securities and Exchange Commission (SEC), alleging that the decisions have been arbitrary and inconsistent with its decision to approve Bitcoin futures ETFs.
Judges Questioning SEC’s Justification
The three presiding judges seemingly sided with Grayscale in their positioning. Judge Neomi Rao continually prodded the SEC Senior Counsel Emily Parise about why they denied previous attempts at introducing a spot bitcoin ETF, asking “Where’s the gap, in the Commission’s view?” The response was that correlation does not equal causation, with its lawyers explaining that it needs more empirical evidence regarding whether fraud and manipulation in the spot markets affect futures markets so as it can rely on its surveillance of future markets. Judge Rao concluded by telling Parise, “The SEC has not offered any explanation that petitioners are wrong.”
SEC Requires More Evidence
Without sufficient evidence from the SEC, it appears unlikely that they will be able to convince 3 out of 5 judges required when an en banc review is requested by either party in order for them to approve a spot bitcoin ETF. This means that unless solid empirical evidence is provided soon, then Grayscale may be successful in getting their GBTC fund converted into an exchange-traded fund.
Record of Oral Arguments Available
The full record of these oral arguments between Grayscale and SEC can be listened to here: [link]. It provides insight into how both parties presented their case as well as potential outcomes based on which way certain questions were answered or avoided during questioning by Judges Srinivasan and Rao.
It remains unclear if or when a decision will be reached regarding whether or not Grayscale will succeed in converting their GBTC trust into an exchange-traded spot fund but what is clear is there are still several obstacles standing between them and success.