Crypto asset manager Grayscale has won a major victory against the U.S. securities regulator SEC. Its application for approval of a Bitcoin ETF was wrongly rejected, a US appeals court has ruled.

The prices exploded. The Washington court ruled that the Securities and Exchange Commission (SEC) erred in rejecting an application from crypto asset manager Grayscale Investments. Grayscale has been seeking approval for an exchange-traded fund that tracks the price of Bitcoin for some time. The court stated that the SEC's decision should be overturned. This means the SEC must review and re-evaluate Grayscale's application for a Bitcoin exchange-traded fund. The SEC could still appeal the decision or reject Grayscale's application again with a stronger argument, leaving the approval of a Bitcoin ETF uncertain.

1/ Grayscale's victory over the SEC is *massive.*

It's very rare for a federal circuit court to find that an agency has violated the APA by acting arbitrarily and capriciously.

The DC Circuit just delivered a huge embarrassment for the SEC.

But the ETF isn't approved yet 🧵
— Jake Chervinsky (@jchervinsky) August 29, 2023

Judge Neomi Rao said, "Grayscale's rejection was arbitrary and unpredictable because the Commission failed to explain its unequal treatment of comparable products."

She also said Grayscale has provided compelling evidence showing that its product has similarities to SEC-approved Bitcoin futures ETFs. The underlying assets of both product categories are closely correlated and the similarities to the Chicago Mercantile Exchange are "identical."

For the crypto industry, this decision is a very important victory and it strengthens the chances for all other Bitcoin ETF applications for approval.

However, this is the second major defeat for the SEC in its fight against the crypto space in a short time: just over a month ago, it lost against Ripple. It remains to be seen whether the authority will also appeal the Grayscale case.