NEW YORK (AP) — Cryptocurrency fund manager Grayscale won a major court battle against the Securities and Exchange Commission on Tuesday, paving the way for the first bitcoin exchange-traded fund.
Grayscale sued the SEC last year after the securities regulator rejected an application to turn its bitcoin fund, known as GBTC, into an ETF. The ETF will be backed by bitcoin rather than bitcoin futures, according to Grayscale’s application at the time.
The SEC rejected the company’s application citing concerns about investor protection and other issues. However, the District of Columbia Court of Appeals ruled in favor of grayscale, dealing another blow to the SEC in its efforts to regulate cryptocurrencies.
Bitcoin jumped 8% on Tuesday.
ETFs are a popular vehicle used to gain exposure to certain assets without investing directly in a product or company stock. ETFs track a desired index, sector or commodity, but they can be bought and sold like regular stocks.
Grayscale argued that a bitcoin ETF would be safer for investors because bitcoin technology cannot advance as quickly as stock-trading technology.
“This is a historic milestone for American investors, the bitcoin ecosystem, and those advocating for bitcoin exposure through the added protection of an ETF wrapper,” Grayscale CEO Michael Sonnenschein said in a prepared statement.
Grayscale’s win will prompt other fund managers to prepare their own bitcoin or cryptocurrency ETFs in time. Both Fidelity and BlackRock have expressed interest in producing such products in the past.