Grayscale court decision was key to Bitcoin ETF approval, says Gary Gensler

The SEC Chair said Grayscale’s court decision “changed” the commission’s approach to spot Bitcoin ETF trading on Wall Street.

Gary Gensler, chairman of the United States Securities and Exchange Commission, acknowledged on Jan. 12 that Grayscale’s court victory was crucial in approving spot Bitcoin (BTC) exchange-traded funds (ETFs).

Although the SEC has denied several applications for a similar product since 2013, Gensler said during an interview with CNBC’s Squawk Box that the court decision in favor of asset manager Grayscale in August 2023 changed the SEC’s perspective over the crypto investment vehicle:

“We had disapproved a number of these [applications for a spot Bitcoin ETF] over the years, and something had changed. I’m a deep believer in the rule of law and respect for the courts, and taking a new court decision into consideration, we move forward. I think this is the most sustainable path forward.”

Despite the go-head, Gensler reiterated that the approval was not an endorsement of Bitcoin. “We do not endorse [Bitcoin].”

In June 2022, the SEC denied Grayscale’s application for the conversion of its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF on the grounds that the product was not “designed to prevent fraudulent and manipulative acts and practices.”

In response, Grayscale filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit. The petition resulted in a significant victory for Grayscale on Aug. 29, 2023, when the court ruled in favor of Grayscale, ordering that the SEC’s legal ground for denying was insufficient and that the case should return to the commission for review.

The legal battle proved to be worthwhile for Grayscale. The SEC gave its blessing to 10 ETFs holding Bitcoin as their underlying asset on Jan. 10.

The inaugural trading session was marked by significant activity, with Grayscale’s GBTC accounting for $2.3 billion in trade volume — almost half of the overall $4.5 billion volume on the day, according to data from Yahoo Finance.

BlackRock’s iShares Bitcoin Trust (IBIT) ranked second, with a trading volume of around $1 billion. Also speaking with CNBC’s Squawk Box program, BlackRock CEO Larry Fink said he is a believer in cryptocurrency as an asset class, not a currency.

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