Cryptocurrency prices jumped on Tuesday after the industry’s largest fund manager, Grayscale Investments, gained a legal victory in its long-running attempt to make it easier for investors to add Bitcoin to their portfolios.
The U.S. Court of Appeals for the D.C. Circuit ruled that the Securities and Exchange Commission (SEC) had acted arbitrarily and capriciously in rejecting Grayscale’s request to create a Bitcoin Exchange Traded Fund (ETF). Grayscale is seeking to create a fund that will enable investors to gain exposure to cryptocurrency through traditional brokers, exchanges, and markets, rather than via digital assets.
The SEC has refused to grant an ETF for Bitcoin, arguing that the markets are exposed to fraud and manipulation.
The long-awaited goal of cryptocurrency enthusiasts has been a Bitcoin ETF. This court ruling may bring the dream of a fund that trades on traditional stock exchanges closer to reality. The news has helped to boost the share prices of cryptocurrency companies such as Coinbase.
Jennifer Rosenthal, a spokeswoman for Grayscale, said in a press release: “This is a monumental step forward for American investors, the Bitcoin ecosystem and all those who have been advocating for Bitcoin exposure.”
A SEC spokesperson said that they are reviewing the court’s decision to determine their next course of action. The ruling can be revisited by the agency within 45 days.
Cryptocurrency prices have been affected by a series of scandals, bankruptcies, and regulatory crackdowns. The SEC is the agency that has filed enforcement actions against crypto giants in recent months. Despite the skepticism of digital asset enthusiasts, they celebrated the appellate court’s decision.
Ji Kim, head of global policy at the industry lobbying group Crypto Council for Innovation, said: “This ruling is not just about Grayscale or Bitcoin, it sets a precedent for the broader crypto industry — this is big, positive and precedent-setting news.”
Bitcoin ETFs have been a dream of enthusiasts since 2013, when Cameron and Tyler Winklevoss founded the crypto exchange, Gemini, and the SEC began regulating securities. The debut of the first Bitcoin futures ETF on the New York Stock Exchange has since seen the SEC approve a number of other funds linked to futures. Bitcoin futures trading is similar to the way pork and corn are traded.
The aforementioned Bitcoin ETF has been rejected by the SEC. The agency has considered numerous applications to create a fund that bets on Bitcoin, but has dismissed them as inconsistent.