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Asset manager Grayscale has won a landmark court ruling against U.S. regulators as it seeks to launch a U.S.-listed exchange-traded fund that tracks the price of flagship cryptocurrency token bitcoin.

On Wednesday, a federal appeals court in Washington, D.C., ruled that the SEC was wrong to deny Grayscale’s application to convert its flagship product, the Grayscale Bitcoin Trust, into an ETF.

The decision has put enormous pressure on SEC Chairman Gary Gensler, who has launched a series of enforcement actions against crypto industry players this year. The U.S. Securities and Exchange Commission (SEC) has filed lawsuits against Nasdaq-listed cryptocurrency exchange Coinbase, as well as Binance, the world’s largest cryptocurrency exchange.

Bitcoin prices rose about 6% after the ruling on Tuesday. It is up 65% so far this year. Shares of Coinbase rose more than 13%.

Grayscale’s lawsuit has largely focused on the question of whether fund managers can offer a spot bitcoin ETF to give retail investors access to the real-time price of bitcoin. While the SEC has previously given the green light to an ETF based on bitcoin futures, regulators have argued that bitcoin, which trades on unregulated exchanges, is vulnerable to market manipulation.

“The rejection of Grayscale’s proposal is arbitrary and capricious because the Commission failed to account for its different treatment of similar products,” Judge Neomi Rao wrote in a three-judge panel of the District of Columbia Circuit Court of Appeals. the SEC’s decision. Block spot ETFs.

The SEC said it was reviewing the court’s ruling. The regulator could appeal to a federal appeals court or the Supreme Court, but it is unclear whether it will choose to do so.

Despite the SEC’s tough stance on the industry, demand for spot bitcoin ETFs is growing, with more traditional players trying to enter the industry. The SEC is considering six other proposals for spot bitcoin ETFs from firms including BlackRock, WisdomTree and Fidelity.

“Based on the court’s decision, this is almost a fatal blow to the SEC’s decision to ban these products from the market,” said Jeremy Senderowicz of law firm Vedder Price. “If this decision stands, it negates the core rationale for the SEC’s rejection of all spot bitcoin ETFs over the past few years.”

Grayscale spokesperson Jennifer Rosenthal said: “This is a landmark step forward for U.S. investors, the Bitcoin ecosystem, and all those advocating investing in Bitcoin through the added protection of an ETF wrapper.”

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