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By Doug Hirsch, Sam Lieberman, Frank Restagno, and Scott Ferrier from law firm Sadis & Goldberg.

On Tuesday, August 29, 2023, Grayscale Investments, LLC obtained a significant court victory in its battle with the Securities Exchange Commission for approval of an Exchange Traded Product based upon the spot price of Bitcoin.

In a 3-0 ruling, the D.C. Circuit Court of Appeals ruled that the SEC's denial of Grayscale's request to convert its closed-end fund to an exchange-traded product was arbitrary and capricious, thereby sending the application back to the SEC for further review. Whether the SEC will now approve the ETP or will attempt to come up with new reasons for its denial is an open question. However, because the Court's opinion was based upon the fact that the SEC cannot treat Grayscale's application differently than the two Bitcoin futures ETPs that the SEC previously approved, the Court's opinion appears to give the SEC very little room to come up with new reasons for the denial of the application. Short of a successful appeal by the SEC, the Court's opinion is likely to pave the way for the approval of an ETP based on the spot price of Bitcoin.

Grayscale has managed a trust known as GBTC for several years, which currently holds approximately 3.4% of all mined Bitcoin. Initially, this trust presented many investors with a straightforward avenue to invest in Bitcoin without the need to register on platforms like Coinbase. How......................

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