JP Morgan analysts, led by Nikolaos Panigirtzoglou, suggest that Grayscale’s court victory over the United States Securities and Exchange Commission (SEC) sets the stage for a flurry of Bitcoin (BTC) exchange-traded funds (ETFs).
In a recent note, JP Morgan analysts proposed that the SEC might need to reconsider its approval of a futures-based Bitcoin ETF to prevent the conversion of Grayscale Bitcoin Trust (GBTC) into a spot ETF. However, the analysts deem this scenario unlikely, as it would be highly disruptive and potentially embarrassing for the SEC.
“[The delays applied to Bitcoin ETF decisions] likely points to approval of multiple spot bitcoin ETF applications at once rather than granting a first-mover advantage to any single applicant.”
JP Morgan note
The analysts also noted that even if Bitcoin spot ETFs were approved, they might not lead to substantial price increases for Bitcoin or the overall crypto market. They highlighted that similar spot Bitcoin ETFs have been available in Canada and Europe for some time but haven’t garnered substantial investor attention.
Grayscale, the manager of the world’s largest bitcoin fund, has been engaged in a legal battle with the SEC over its request to convert its investment vehicle into an ETF.
The SEC initially rejected Grayscale’s proposal, citing concerns about investor protection against fraudulent and manipulative practices.
In response to the SEC’s denial, Grayscale criticized the agency’s stance as “illogical” and “discriminatory.” Several affiliations, including The Blockchain Society, The Chamber of Digital Commerce, the Chamber of Progress, and Coin Center, filed an amicus curiae to support Grayscale and criticize the SEC’s decision.
However, Grayscale recently secured a significant victory in its legal battle against the SEC. A panel of three federal judges in Washington overturned the SEC’s decision, allowing Grayscale to proceed with the initiation of a Bitcoin spot ETF. This decision had a positive impact on the crypto market, pumping BTC and crypto prices.
The US Court of Appeals for the District of Columbia Circuit ruled in favor of Grayscale, deeming the SEC’s prior rejection of the company’s Bitcoin spot ETF proposal as “arbitrary and capricious.”
The court recognized that Grayscale had presented substantial evidence to support the similarity of their offering to existing Bitcoin futures ETFs, which had already gained SEC approval.
Importantly, the court underscored the parallels, such as the surveillance-sharing agreements both products have with the Chicago Mercantile Exchange (CME).