Bloomberg Analyst Says Defeating SEC May Not Guarantee GBTC ETF

James Seyffart, an ETF Research Analyst for Bloomberg Intelligence, believes that a victory for Grayscale Investments in its ongoing lawsuit against the U.S. Securities and Exchange Commission (SEC) may not necessarily allow the firm to start issuing spot Bitcoin exchange-traded funds (ETF) after converting existing Grayscale Bitcoin Trust (GBTC) shares.

Seyffart recently appeared in a podcast hosted by What Bitcoin Did. The Bloomberg analyst shared his take on the ongoing legal battle between the Digital Currency Group’s subsidiary and the top securities regulator in the United States. The lawsuit was filed in June 2022 after the SEC rejected Grayscale’s application to convert GBTC to a spot Bitcoin ETF.

The analyst indicated that there was a high likelihood of the SEC losing the lawsuit. The prediction was in line with a Bloomberg memo that Seyffart had contributed to earlier this year. The memo, penned by Bloomberg’s Senior Litigation Analyst Elliot Stein, noted that the court would likely vacate the SEC’s order rejecting Grayscale’s spot BTC ETF.

Bloomberg Intelligence is of the opinion that Grayscale is 70% likely to win. A ruling can be expected in the matter in the second or third quarter of 2023. However, the language in the ruling will dictate whether the court gives the SEC an opening to reject the ETF application on different grounds or compels them to accept it.

Speaking on the aftermath of a favorable outcome for Grayscale, Seyffart noted, “The SEC could then just deny for other reasons… So Grayscale might win the case and then still not be able to convert to an ETF.”

Earlier this year, Grayscale CEO Michael Sonnenshein appeared in a What Bitcoin Did podcast. When asked about the timeline of a verdict, Sonnenshein revealed that he expected a ruling in the matter as early as the fall of 2023, i.e., somewhere between Q2 and Q3.

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