Grayscale Victory Over SEC Would Not Guarantee Bitcoin ETF

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  • Bloomberg analyst James Seyffart has warned that the SEC could still deny Grayscale a Bitcoin ETF even if it loses its court case
  • Grayscale sued the SEC last year over the denial of the conversion of its Bitcoin trust to a Bitcoin ETF
  • Seyffart warned that the SEC could find other grounds to reject the conversion if it lost

Bloomberg analyst James Seyffart has warned that the Securities and Exchange Commission (SEC) could still deny Grayscale a Bitcoin ETF even if the fund operator won a legal dispute over the matter. Seyffart told the What Bitcoin Did podcast that the agency could still deny the conversion from the Grayscale Bitcoin Trust to a full Bitcoin spot ETF on grounds other than those complained about in the lawsuit, potentially rendering any victory worthless.

Grayscale Pursuing Conversion to Bitcoin ETF

Grayscale launched legal proceedings against the SEC in June last year when the agency rejected its application to turn its Grayscale Bitcoin Fund into a Bitcoin ETF, which represents the only way its customers can get their hands on their investments. The trust currently holds over $17 billion worth of bitcoin, although its GBTC shares are trading at 43% below this value.

At the time, Seyffart stated that the legal process would take up to 18 months to resolve, suggesting a verdict by the end of 2024, while other Bloomberg analysts gave Grayscale little chance of success. This changed in March this year when oral arguments were heard, a hearing that resulted in Bloomberg coming out in favor of a Grayscale victory with a 70% probability. 

SEC Could Move Goalposts

Despite this positivity, Bloomberg analyst Elliott Stein warned that the court decision might not be final and binding, saying that the judge could leave wiggle room for the SEC to further oppose a Bitcoin ETF rather than locking it into a decision.

Seyffart has now echoed these sentiments, warning in his interview that a win would not necessarily mean a Bitcoin ETF was definite:

The SEC could then just deny for other reasons…so Grayscale might win the case and then still not be able to convert to an ETF.

This would be a tragedy for beleaguered GBTC shareholders, who would see their best chance for years to cash out go up in smoke, and the premium probably drop further.