SEC Could Craft New Reasons to Reject Spot Bitcoin ETFs, Analysts Say

• The SEC may come up with new reasons to reject spot bitcoin ETF applications, even after a court ruling compelled it to revisit rejections.
• The court ruling improves the chances of ETF approval but does not guarantee it, as the SEC can still appeal.
• Analysts say the SEC could cite issues like Coinbase’s potential ETF involvement as new grounds for rejection.

The U.S. Securities and Exchange Commission (SEC) may come up with new justifications for rejecting applications for spot bitcoin exchange-traded funds (ETFs), analysts say. This comes after a court ruling this week compelled the regulator to revisit its rejection of Grayscale’s spot bitcoin ETF application.

In a report on Wednesday, analysts at German investment bank Berenberg said the SEC could prepare alternative arguments to continue blocking spot bitcoin ETFs over concerns about the integrity of the spot BTC market.

The analysts note that while the court ruling was a positive development for crypto investors, it did not outright force the SEC to greenlight a spot bitcoin ETF. Rather, it required the regulator to re-examine the rationale it used to reject Grayscale’s application.

Crucially, the ruling also gives the SEC the option to appeal, meaning the agency may not simply accept the court’s decision.

There is no guarantee for approval of a Bitcoin ETF

Berenberg cautions that the Grayscale legal victory does not guarantee the SEC will finally approve one or more spot bitcoin ETF applications. However, it likely improved those odds, the analysts say.

The eventual approval of a spot bitcoin ETF would allow a broader range of institutional investors to access the crypto market. ETFs are popular investment vehicles that enable exposure to an asset class without directly purchasing the underlying assets.

Currently, the SEC has only permitted bitcoin futures ETFs, which some critics argue do not provide the same benefits as direct ownership of bitcoin.

Berenberg notes that crypto-linked stocks like Coinbase and MicroStrategy rallied strongly after Tuesday’s court ruling. This signals investors are increasingly optimistic about the prospects for a spot bitcoin ETF.

However, the analysts point out that the SEC could potentially argue that Coinbase’s involvement in any approved ETFs raises integrity concerns. This illustrates that the regulator still has avenues to justify rejecting spot bitcoin ETF applications.

For now, the crypto industry will await the SEC’s next moves following this week’s significant court decision. With new justifications possible, it remains to be seen whether the agency will finally pave the way for the long-awaited spot bitcoin ETF.