Grayscale Legal Win Indicates SEC More Likely To Approve Spot Bitcoin ETFs, JPMorgan Says

Updated: 05 September 2023

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Grayscale’s landmark legal win against the Securities and Exchange Commission (SEC) last week indicates the regulator will likely approve spot Bitcoin ETFs, JP Morgan said.

The ruling has left the watchdog in a difficult spot because the court said the SEC’s disparate treatment of futures-based and spot Bitcoin ETFs lacked justification as both face a similar risk of fraud and manipulation, said analysts led by Nikolaos Panigirtzoglou. The court called the SEC’s decision to approve futures ETFs but not spot Bitcoin investment products “arbitrary and capricious.”

Because the SEC is unlikely to risk the disruption and embarrassment of retracting its previous support for futures-based ETFs, it is very likely to approve the applications for spot Bitcoin ETFs, including Grayscale’s, the analysts said.

JUST IN: 🇺🇸 JPMorgan says SEC will likely approve Grayscale's Spot #Bitcoin ETF.

— Watcher.Guru (@WatcherGuru) September 3, 2023

Seven firms, including BlackRock and Fidelity, have applied to launch spot Bitcoin ETFs. The SEC last week also deferred a decision on the applications until at least next month. The delay hints at a possible simultaneous approval of multiple spot Bitcoin ETF applications, said JPMorgan.

Bitcoin ETFs To Have Limited Impact Crypto Market

JPMorgan is sceptical that the launch of spot Bitcoin ETFs will bring about a transformative change in the cryptocurrency market, as some have suggested.

They note that spot Bitcoin ETFs have been operational in Canada and Europe for a considerable time but have failed to attract substantial investor interest. The analysts also argued that the outflows from gold ETFs over the past year have not significantly benefited Bitcoin funds, including futures-based ETFs.

They added that the advantages of spot Bitcoin ETFs over their futures-based counterparts are small.

Former SEC Chairman Echoes JP Morgan

Former SEC Chairman Jay Clayton had earlier said that approval of a spot Bitcoin ETF is “inevitable.” He emphasized that Bitcoin should not be classified as a security and pointed out the inconsistency of allowing futures-based products while denying spot-based ones.

An approval of a Spot #Bitcoin ETF is inevitable. – Jay Clayton, former SEC Chair pic.twitter.com/hcAIxJBiKb

— Michael Saylor⚡️ (@saylor) September 1, 2023