Digital asset manager Grayscale is embroiled in a legal fight against the U.S. Securities and Exchange Commission (SEC). The company requested approval to convert its most significant and most popular product, the Grayscale Bitcoin Trust (GBTC), into an Exchange Traded Fund (ETF). The regulator refused, leading to today’s events.
Reminder: Oral arguments in our lawsuit challenging the SEC’s decision to deny our application to convert $GBTC to a spot #Bitcoin ETF are scheduled for the morning of March 7.
Exact timing may vary, but we could begin as early as 10:00 AM ET.https://t.co/iZnluMgIIc
— Grayscale (@Grayscale) March 6, 2023
The digital asset manager filed a lawsuit against the Commission. Today, both parties presented their oral arguments. According to several experts, the company scored a win over the regulator, which led to a spike in the GBTC premium. This product returned to levels last seen in 2022 when Bitcoin was above $30,000.
Grayscale Versus The SEC, Round One
Bloomberg’s Intelligence James Seyffart commented on the arguments and their potential result for the Digital asset manager. The judges’ reaction to the SEC lawyer’s arguments surprised the expert.
Seyffart was expecting two of the judges, Democrats, and likely anti-crypto, to side with the Commission while the republican judge to side with Grayscale. As it turns out, all three judges were critical of the SEC’s arguments.
The regulator’s legal representative made some mistakes in the arguments by using ambiguous legal language. The judges questioned this legal language, the SEC’s attorney referenced the difference between futures and spot market regulations and how the Bitcoin market is “manipulated” to the court’s “dissatisfaction.”
Seyffart believes that this line of argumentation from the SEC, one claiming that the Bitcoin spot market is “manipulated,” could be the regulator’s undoing. The expert and many others have argued that there are no legal grounds to deny BTC spot ETFs.
Senior ETF analyst for Bloomberg Intelligence, Eric Balchunas, added the following on why the opening arguments were positive for the asset management firm:
Judges are now double teaming the SEC with q variations of this main point: how can you guys argue that manipulation in spot wouldn’t effect the futures, thus the surveling sharing agreement of futures isn’t really meaningful, which is ur whole point in disaproving spot etf.
Today, the judges’ positions hinted at a favorable outcome for Grayscale and the many firms looking to launch a Bitcoin ETF in the United States. However, there is a long road ahead full of complications. Seyffart said:
I should add. Even if the judges grant a victory to Grayscale and vacate the SEC’s denial (which seems distinctly plausible now)… There’s still a big “IF” on how the judges handle it … the SEC could then theoretically deny again for different reasons.
The expert believes Grayscale can win over the three judges and gain the upper hand. The market agrees with this perception as the GBTC premium pushes upward for the first time in a while.