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The landmark win that Grayscale Investments scored last month likely clears the path for spot Bitcoin exchange-traded funds (ETF) as the United States Securities and Exchange Commission (SEC) will have no choice but to approve multiple applications, according to a report by JPMorgan.

JPMorgan analysts led by Nikolaos Panigirtzoglou believe Grayscale’s recent court win increases the likelihood of a spot Bitcoin ETF being approved.

A federal appeals court concurred with Grayscale’s arguments that a spot BTC ETF meets the same criteria for market manipulation and fraud concerns as the already approved Bitcoin futures ETFs, making the SEC’s rejection of spot Bitcoin ETF applications arbitrary.

“The most important element of the Grayscale vs. SEC court ruling was that the denial by SEC was arbitrary and capricious because the Commission failed to explain its different treatment of similar products i.e., futures-based bitcoin ETFs,” the bank’s strategists remarked in a note on Friday.

An ETF is an investment product traded on an exchange, similar to equities, and tracks the value of an underlying asset. Their popularity has been surging because they allow investors to gain exposure to Bitcoin without actually having to hold the underlying crypto themselves.

The Grayscale decision suggests that the regulatory agency would have to essentially revoke its previous approval of futures-based Bitcoin ETFs so as to defend its denial of Grayscale’s bid of converting its flagship Bitcoin trust into an ETF. Still, such a move would be “very disruptive and embarrassing for the SEC” and appears unlikely, they noted.

As such, “it looks more likely that the SEC would be forced to approve the spot bitcoin ETF applications that are still in play from numerous high-profile financial institutions, including that from Grayscale and BlackRock,” the analysts posited.

As expected, the SEC recently delayed its decision on all seven pending applications by 45 days. Analysts have forecasted that the agency will likely not decide on any ETF filing until early next year when the final deadlines approach.

While Grayscale’s victory may bring us closer to the eventual listing of spot Bitcoin ETFs for U.S. customers, JPMorgan is convinced such an approval is “unlikely to prove a game changer for the crypto market.” 

The analysts reiterated that spot Bitcoin ETFs have existed in Canada and Europe for some time but have failed to attract considerable investor interest. Furthermore, while spot Bitcoin ETFs may offer some advantages over futures-based funds, these benefits are rather marginal, the bank said.

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