In Grayscale v. SEC, the U.S. Court of Appeals for the DC Circuit ruled on August 29th, 2023 that the agency acted arbitrarily by refusing to grant the digital asset firm permission to operate a Bitcoin ETF.

The decision, which comes after the SEC turned down Grayscale's most recent attempt to introduce a Bitcoin ETF last October, may result in a massive influx of fresh capital into Bitcoin.

Pension funds and other major investors have mostly kept out of the Bitcoin market while regular buyers and hedge funds have done so for more than a decade, in part because corporate by-laws limit what they may invest in on behalf of their clients.

It is widely anticipated that the launch of a Bitcoin ETF will put to rest any legal and reputational worries among cautious investors and significantly increase the liquidity of Bitcoin.

Grayscale filed a complaint against the regulator in October of last year after it denied the company's most recent request to launch a Bitcoin ETF. 

In Grayscale's complaint, the agency was criticized for treating Bitcoin spot market ETFs differently from those that bundle Bitcoin futures contracts, which have been permitted by the agency since 2021.

Grayscale contended at a hearing in March that the SEC's alleged basis for rejecting its application—that there was a possibility the underlying Bitcoin market would be manipulated—was unjustifiable since the same worries might apply to the futures market.

The decision does not require the SEC to immediately comply with the ruling at this time. Although the agency has the option of appealing the verdict, the fact that established financial institutions like BlackRock and Fidelity have submitted applications for Bitcoin ETFs increases the likelihood that it will simply accept the court's decision and approve the applications in the near future.

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