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The price of bitcoin surged Tuesday after the U.S. Court of Appeals for the DC Circuit ruled that the Securities and Exchange Commission was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust into an ETF.
Bitcoin jumped about 5.9% following the ruling to $27,523.61, according to Coin Metrics. The move lifted cryptocurrencies broadly as well as crypto equities higher.
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Grayscale’s lawsuit against the SEC has been closely watched by investors and other industry participants as a key catalyst that would shake up a market marred by low volatility and liquidity. Earlier this month bitcoin trading volatility fell to its lowest level in more than four years as investors had been waiting on the sidelines for more regulatory clarity on crypto activity – whether through new legislation out of Congress or through the ability to launch a spot bitcoin ETF. Several bitcoin futures ETFs have already been approved.
“The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” the court said in the ruling. “We therefore grant Grayscale’s petition and vacate the order.”
Grayscale initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its bitcoin trust, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.
The Grayscale Bitcoin Trust itself jumped 17%.