Why Spot Bitcoin ETF is not guaranteed: Analyst

• Bloomberg’s James Seyffart believes that Grayscale’s victory against the SEC may not guarantee a Spot Bitcoin ETF.
• He stated that approval of the ETF application will depend on the language used by the court during its ruling.

A Bloomberg analyst has predicted that Grayscale Investment’s victory in the lawsuit filed against the U.S. Securities and Exchange Commission may not guarantee permission for the firm to issue Spot Bitcoin [BTC] ETFs.

James Seyffart, who works as an exchange traded fund (ETF) Research Analyst for Bloomberg Intelligence, recently appeared in a podcast hosted by Peter McCormack of “What Bitcoin Did” fame, where he shared his take on the ongoing legal battle between the world’s largest BTC holder and the top securities regulator in the United States. 

Grayscale verdict expected soon

Speaking on the ongoing lawsuit, James Seyffart stated that Grayscale Investments would likely receive a favorable verdict from the court in the matter of the SEC’s alleged Administrative Procedures Act (APA) violation.

For context, the Digital Currency Group subsidiary had accused the SEC of violating the APA because the regulator had approved applications for Bitcoin futures ETF, but denied their application for issuing Spot Bitcoin ETFs.

The APA requires federal agencies like the SEC to treat similar matters equally, rather than making arbitrary decisions. 

Seyffart acknowledged that Grayscale’s victory wouldn’t necessarily allow it to convert the Grayscale Bitcoin Trust (GBTC) into a Spot Bitcoin ETF. The approval would be largely dependent on the language of the final court verdict. For instance, the court could find the SEC violating the APA and ask it to review the application, leaving the door open to other reasons for rejection.

The analyst expected a decision in the matter between the second and third quarter of 2023. 

James Seyffart’s outlook on the lawsuit resonated with a previous outlook shared by Bloomberg’s Senior Litigation analyst Elliot Stein earlier this year. Following the oral arguments between both parties on 7 March, Stein noted that Grayscale had a 70% chance of winning the lawsuit.

He said:

“Language in the court ruling will be key…as to whether the court gives the SEC an opening to reject the application on different grounds or locks them into accepting it.”