A federal appeals court formalized a victory for Grayscale Investments LLC in its bid to create an exchange-traded fund based on Bitcoin over the objection of the U.S. Securities and Exchange Commission, Bloomberg News reported. The move sends the matter back to the SEC. The mandate puts into effect the court’s ruling in August, when it overturned the SEC’s rejection of Grayscale’s proposal to convert its trust into an ETF. Judge Neomi Rao called the SEC’s decision “arbitrary and capricious” because the regulator failed to explain why it approved similar products. The SEC had argued that an ETF based on Bitcoin lacked adequate oversight to detect fraud. “The Grayscale team looks forward to continuing to work constructively with the SEC to convert GBTC to an ETF,” Grayscale spokeswoman Jennifer Rosenthal said in a statement. “GBTC is operationally ready, and we intend to move as expeditiously as possible on behalf of our investors.” Approval of the ETFs is seen as a potential watershed moment by digital-asset advocates, who say broader access will lead to mainstream acceptance of what has been viewed by critics as a lightly regulated speculative niche. Industry scandals and bankruptcies such as the collapse of the FTX exchange helped to cut the estimated value of the sector by more than half since late 2021 to around $1 trillion. Bitcoin accounts for about half the total.
