Cryptocurrencies rose after a federal appeals court sided with an asset manager hoping to launch the first bitcoin exchange-traded fund despite objections from the Securities and Exchange Commission.
The decision in favor of Grayscale Investments was a huge win for the industry as it pushes for broader mainstream exposure to digital assets. This was a blow to the Securities and Exchange Commission, which is in the midst of a massive crackdown on the industry.
Bitcoin (BTC-USD) rose more than 5%, jumping above $27,000, its biggest one-day jump since June. Shares of Coinbase (COIN), the largest cryptocurrency exchange in the United States, rose more than 13%, while shares of bitcoin miners Marathon Digital (MARA) and Riot Blockchain (Riot Blockchain) rose.riot control) jumped 18% and 24%, respectively.
Asset managers have been trying for years to get the Securities and Exchange Commission to approve a Bitcoin exchange-traded fund, which would allow investors exposure to the world’s largest cryptocurrency without having to own it. The SEC denied the various filings, arguing that the products were subject to market manipulation.
Grayscale decided in 2022 to sue the SEC after it was not allowed to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin offering, arguing that the agency had already approved exchange-traded products holding Bitcoin futures and thus “acted arbitrarily and capriciously.” . “.
The three-judge appeals panel agreed with Grayscale, saying on Tuesday in its decision that Grayscale “presented substantial evidence” that its product is similar to the SEC-approved Bitcoin futures ETFs.
“The rejection of Grayscale’s motion was arbitrary and capricious because the panel failed to explain its different treatment of similar products,” Judge Nyomi Rao said in the opinion.
The decision could enhance other asset managers’ chances of getting their products approved. The world’s largest money management company, BlackRock (BLK), Papers have been filed with the SEC In June to create a Bitcoin spot exchange fund. Coinbase will be the custodian for these bitcoin holdings.
This summer, other institutional firms such as Invesco and Wisdom Tree Investments renewed spot bitcoin ETF applications they had previously submitted to regulators.
“In our opinion, there is no doubt now that BTC ETFs are coming to the US,” said Tim Bevan, founder and CEO of UK-based crypto financial services firm ETC Group. “The level of pent-up institutional and retail demand in the United States is notably low.”
The SEC said on Tuesday that it is reviewing the court’s new ruling and will decide its next steps. A Grayscale spokeswoman said, “The Grayscale team and our legal counsel are actively reviewing the details described in the court’s opinion and will pursue next steps with the SEC.”
The SEC battles with the cryptocurrency industry on a number of other fronts. Since the beginning of 2023, the SEC has charged 17 different players in the cryptocurrency space with violating securities laws, including several exchanges that allow investors to trade digital currencies as well as individual issuers of digital tokens.
The SEC’s primary assertion in many of these cases is that cryptocurrencies are securities, and therefore must be registered with the agency.
The courts have not yet been clear on how to deal with digital currencies.
Analisa Torres, U.S. District Judge for the Southern District of New York, said on July 13 that a digital token issued by Ripple Labs was only a security when it was sold to institutional investors, not when it was bought by the general public. The SEC also sued Ripple for selling unregistered securities.
Then, on July 31, U.S. Judge Jed Rakoff disagreed with that specific opinion in his case, where the SEC alleged that stablecoin issuer Terraform Labs sold unregistered securities.
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