In a seismic shift for the Bitcoin industry, the DC Circuit court has ruled in favor of Grayscale Investments yesterday, effectively vacating the US Securities and Exchange Commission’s (SEC) previous denial of Grayscale’s Bitcoin spot ETF proposal. The decision has set the stage for a new chapter in the long-standing saga of Bitcoin spot ETFs, with experts speculating on various timelines and outcomes.

Jake Chervinsky, Chief Policy Officer at Blockchain Association, described the ruling as “massive,” emphasizing that it’s extremely rare for a federal circuit court to find an agency like the SEC in violation of the Administrative Procedure Act (APA). Chervinsky stated, “The DC Circuit soundly rejected the SEC’s view that Grayscale’s ETF proposal was not ‘designed to prevent fraudulent and manipulative acts and practices.'”

He also pointed out that the court did not order the SEC to approve the proposal but rather mandated a review of Grayscale’s proposal with the court’s ruling in mind. Chervinsky speculated on two possible scenarios for the SEC’s next steps.

One theory suggests that the SEC could find another reason to deny the proposal, given the “extreme hostility of SEC leadership toward crypto.” Alternatively, the SEC might take this as a semi-graceful exit from their anti-ETF stance, especially under political pressure from traditional finance sectors ready for a Bitcoin ETF. Many other issuers have proposed ETFs this year, including Blackrock, and Larry Fink throws heavy punches in DC. Therefore, lawyer thinks:

The only question is if the SEC wants to make this more painful for itself. Trust me, if there’s another denial, there will be another lawsuit. I strongly recommend the SEC picks sooner. Let’s see.

James Seyffart, an ETF analyst at Bloomberg Intelligence, corroborated the significance of the ruling, stating, “This is a complete and utter rebuke of all the SEC’s spot Bitcoin ETF denial orders.” Seyffart highlighted that there are no explicit timelines given by the court for the SEC’s next decision.

“I was initially thinking something like a deadline of 45 days or 60 days but nothing in here saying that,” remarked Seyffart. However, he noted that the SEC has 45 days to file for an en banc hearing, which would involve all 17 judges on the court, as opposed to the initial subset panel of three judges.

The Bloomberg analyst also outlined two main options for the SEC if they still wish to prevent spot Bitcoin ETFs from listing: either revoke the listing of Bitcoin Futures ETFs or deny based on new reasons, possibly related to custody or settlement issues, which have been a focal point in the SEC’s Staff Accounting Bulletin 121 (SAB 121).

Adam Cochran, partner at CEHV, added another layer to the timeline speculation. He alluded to the SEC’s pending decisions on six other Bitcoin spot ETF filings due by September 1 for Bitwise and September 2 for BlackRock, Fidelity, and others. He stated:

Some folks getting ahead of themselves thinking Grayscale decision means bulk approval of ETFs this Friday. Likely not the case, my hunch is we’re looking at a late Oct/Nov timeline for an approval still, unless the SEC appeals, in which case next Spring.

In summary, while the court’s decision is a significant win for Grayscale and the broader crypto community, it does not guarantee an immediate approval of a Bitcoin spot ETF. The SEC now faces a complex set of choices, influenced by legal, political, and market pressures.

At press time, BTC traded at $27,466, up 5.3% in the last 24 hours.

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