Though many doubted their odds, Grayscale has defeated the Securities and Exchange Commission (SEC) in court, bringing the U.S. market one step closer to approval of a Bitcoin spot ETF.
Going into its lawsuit, certain legal and market experts saw Grayscale’s victory as quite likely: Here are just a few of them
Why Grayscale’s Victory Was Assured
Back in June, Bloomberg Intelligence Senior Legal Analyst Elliot Z. Stein afforded Grayscale a 70% chance of winning its lawsuit against the SEC.
“The SEC and Chair Gary Gensler may be bracing for a loss and looking to preemptively soften it or make it meaningless by approving spot Bitcoin ETF application before or around the same time as a court decision,” the analyst wrote in a research note at the time.
Grayscale’s lawsuit specifically accused the SEC of arbitrary and capricious treatment of its filing to convert the Grayscale Bitcoin fund into a spot ETF. Grayscale claimed that the agency’s approval of “similar” Bitcoin futures ETFs was proof of a double standard.
During oral arguments in March, judges overseeing the case appeared to agree with Grayscale, pressing the SEC for having no decent explanation for why Grayscale was wrong. After the relevant hearings, Stein boosted Grayscale’s victory odds from 40% to 70%.
Bloomberg’s ETF analysts James Seyffart and Eric Balcunas also sided with Stein on the matter. Since at least June, they’ve maintained that a Grayscale court victory is the most likely course to spot ETF approval this year, despite BlackRock’s entry into the market.
Another Right Call For Deaton
Crypto Lawyer John Deaton – who represented thousands of XRP investors during Ripple’s lawsuit against the SEC – predicted Grayscale’s court victory as early as February, before oral arguments even took place.
I predict a win for @Grayscale. When you fight back, the SEC isn’t as successful at winning as @GaryGensler and others would have you believe – just as @s_alderoty recently tweeted out that the SEC has lost 4 out of last 5 cases before the Supreme Court. https://t.co/QakllHSDiM
— John E Deaton (@JohnEDeaton1) February 28, 2023
“When you fight back, the SEC isn’t as successful at winning as Gary Gensler and others would have you believe,” he said at the time.
Deaton followed up after the court’s decision on Tuesday, stating that many “smart lawyers” thought the SEC would win since Grayscale was attempting to meet a “very high and difficult standard” in proving “arbitrary and capricious” treatment from the agency.
However, Deaton’s experience fighting the SEC in the XRP case for years proved to him that the agency consistently makes “inconsistent, incoherent, and oftentimes, absurd arguments, over and over again.”
“I was confident the SEC would lose because I was confident they wouldn’t be able to reasonably explain why they granted a futures ETF but not a spot,” he said.
Despite Bitcoin and GBTC both rallying in response to the news, others have warned that spot ETF approval is not yet guaranteed. Last month, Bitcoin-supportive lawyer Joe Carlasare told CryptoPotato that a ‘win’ for Grayscale simply means that the SEC would be ordered to revisit its decision on the company’s application.
Nevertheless, Carlasare said in early July that the best chance of ETF approval “rests with a favorable outcome in the Grayscale v SEC case.”
— Joe Carlasare (@JoeCarlasare) August 29, 2023