SEC reportedly won’t appeal court decision on Grayscale Bitcoin ETF.

The Securities and Exchange Commission (SEC) has decided not to appeal a court’s reversal of its decision to reject Grayscale’s application to convert its bitcoin trust into an exchange-traded fund (ETF). This move increased the likelihood of the Grayscale Bitcoin Trust (GBTC) becoming a Bitcoin ETF, and it had an immediate positive effect on the price of Bitcoin, which shot up above $27,000.

In August, the D.C. Circuit Court of Appeals ruled that the SEC’s denial of Grayscale’s application was “arbitrary and capricious,” it must be reviewed. The court emphasized that federal agencies should treat similar cases consistently. The SEC had until Friday to decide whether to challenge the court’s decision, but it will let the deadline pass without appealing, according to a person familiar with the matter.

How the SEC will proceed with Grayscale’s application in the next round remains uncertain. While the agency still has the authority to reject it on other grounds, Grayscale could challenge any new reasons for denial in court. Grayscale’s application to convert its closed-end fund into an ETF was first submitted in October 2021. GBTC is the world’s largest cryptocurrency fund and has been trading at a discount to its bitcoin holdings since February 2021, although the discount has recently narrowed to around 17%.

Grayscale has long advocated converting GBTC to an ETF, as it believes it would eliminate the discount and align the price with the underlying bitcoin. ETFs have a creation-redemption model, allowing for the creation of new shares to meet demand or the redemption of shares to reduce supply.

Grayscale is not the only entity seeking SEC approval for a Bitcoin spot ETF. Other major players like BlackRock and Fidelity are also awaiting the SEC’s application decision.

The SEC’s decision not to appeal the court’s ruling marks a significant development for the potential approval of a bitcoin ETF in the United States. If successful, it would open the doors for more investors to gain exposure to Bitcoin through a regulated and accessible investment vehicle.