Analysis Grayscale proposal must be re-examined, what will the SEC do?
Re-examination of Grayscale proposal What will the SEC do?
Author: Jake Chervinsky, General Counsel of the Blockchain Association; Translator: LianGuai0xJS
1. Grayscale defeating the SEC is a huge victory.
The federal appeals court rarely finds government agency actions to be arbitrary and capricious, in violation of the Administrative Procedure Act.
The DC Circuit Court just brought a huge embarrassment to the SEC.
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But the ETF has not been approved yet.
2. The DC Circuit Court firmly opposed the SEC’s argument that Grayscale’s ETF proposal is not “designed to prevent fraud and manipulation.”
Under this reasoning, the SEC has spent a full decade rejecting Bitcoin spot ETF proposals. That era is over now.
3. However, the court did not order the SEC to approve Grayscale’s ETF proposal. It simply said that the SEC’s analysis on the “fraud and manipulation” issue was incorrect.
Now, the SEC must reconsider Grayscale’s proposal in light of the court’s ruling.
What will the SEC do?
4. One theory is that the SEC will choose another reason to reject Grayscale’s proposal, forcing a longer and more expensive litigation.
That’s possible. It is difficult to underestimate the extreme hostility of the SEC leadership towards cryptocurrencies.
Will Chairman Gensler really accept this failure?
5. But another theory is that the SEC will see the DC Circuit Court’s decision as a (semi) graceful exit from their anti-ETF stance.
I stand on this side. It is the right move.
“We disagree, but we follow the rule of law” is a convenient excuse to exit a failed battle.
6. The SEC will also face political pressure to approve a Bitcoin spot ETF.
This is not just about Grayscale. All traditional finance is ready for a Bitcoin ETF.
There have been many other issuers proposing ETFs this year, including BlackRock, and Larry Fink has launched a heavyweight attack in Washington.
7. Chairman Gensler can also weave a narrative of preserving face from approving a Bitcoin spot ETF.
The SEC has faced strong criticism for regulating cryptocurrencies through enforcement measures.
This is an opportunity to say, “Look, we are not against cryptocurrencies! We are willing to approve appropriate products!”
8. I have no doubt that we will eventually get a Bitcoin spot ETF.
The only question is whether the SEC is willing to make it more painful. Believe me, if it is rejected again, there will be another lawsuit.
I strongly recommend that the SEC choose to approve it “sooner” rather than later.
Let’s wait and see.