Munger, Tolles & Olson Secures Significant Appellate Victory for Grayscale Investments
Munger, Tolles & Olson secured a significant appellate victory for Grayscale Investments, LLC, when the D.C. Circuit vacated a Securities and Exchange Commission (SEC) order denying Grayscale’s bid to launch the first spot bitcoin exchange-traded product (ETP) in the United States.
The court’s decision could well pave the way for greater investor access to bitcoin and other cryptocurrencies. Bitcoin prices surged on news of the ruling.
The petition for review in the D.C. Circuit challenged the SEC’s decision to block a national exchange’s request to convert Grayscale’s flagship product, Grayscale’s Bitcoin Trust (Symbol: GBTC), to a spot ETP that would hold and closely track the value of bitcoin. Such a conversion would confer significant benefits on investors, allowing them to easily gain exposure to bitcoin without investing directly in that asset—just as they gain exposure to stocks, gold, and other commodities when they purchase shares of ETPs that hold those assets.
As lead appellate counsel, MTO contended that the SEC’s decision was arbitrary, discriminatory, and in excess of the Commission’s statutory authority. MTO pointed out that the SEC had recently approved several bitcoin futures ETPs and that those ETPs are subject to exactly the same risks (if any) as a spot bitcoin ETP would be.
The appeal was argued before the D.C. Circuit by partner Don Verrilli in March 2023. Siding with Grayscale, a three-judge panel yesterday vacated the SEC’s decision, agreeing that the SEC had not adequately explained how its denial here was consistent with its approval of two materially similar bitcoin futures ETPs. The panel concluded that “[t]he denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.”
Grayscale Bitcoin Trust is the largest publicly traded bitcoin investment fund in the world. It holds about 3.4% of all outstanding bitcoin, with approximately $15 billion in assets under management, tens to hundreds of millions of dollars in daily trading volume, and nearly one million investor accounts in the United States.
About MTO’s Appellate Practice
Munger, Tolles & Olson’s appellate and Supreme Court practice is recognized as among the best in the nation and routinely handles the highest-stakes matters before the U.S. Supreme Court, U.S. courts of appeals, and state appellate courts. Our lawyers have secured victories in cases of historic importance and have won ground-breaking appeals around the country on a wide range of subjects, including antitrust, securities, intellectual property, cross-border disputes, and regulatory matters.