Legal Battles Loom if SEC Rejects Spot Bitcoin ETF
The possibility of SEC approval for a spot bitcoin exchange-traded fund (ETF) has generated growing optimism in recent weeks, with some analysts predicting approvals could come within months. However, potential legal battles could arise if the SEC ultimately rejects any spot Bitcoin ETF applications. According to a report from JPMorgan analysts led by Nikolaos Panigirtzoglou, the SEC could face lawsuits from ETF applicants if it declines to approve any spot bitcoin ETFs. While an outright rejection is viewed as unlikely, it remains a possibility.
“Any rejection could trigger lawsuits against SEC creating more legal troubles for the agency,” the analysts wrote in the report.
Panigirtzoglou commented that new legal challenges would not be ideal for the SEC, but it’s a risk the agency may be willing to take. This comes after the SEC lost a court case filed against it by Grayscale Investments, which led to the court mandating that the SEC reconsider the application.
JPMorgan Predicts Approval of Spot Bitcoin ETFs
JPMorgan reiterated that the SEC will likely approve multiple spot bitcoin ETFs within 2023, despite potential legal hurdles. The bank stated that asset managers have been addressing concerns around market manipulation and custody of customer funds in amended filings, which have helped clarify these issues. The recent bitcoin price rally has been attributed to institutional demand, with evidence of rising institutional interest seen through increased bitcoin futures positions on the CME and inflows into larger Bitcoin wallets.
The analysts also noted that the recent surge in the bitcoin price, reaching above $34,000, has been driven by institutional flows rather than retail speculation. In comparison, Ethereum futures positions have not experienced the same spike, indicating that Bitcoin is currently attracting greater institutional interest.
While there is growing confidence in near-term ETF approvals, the path forward is still unclear. Market participants are left to speculate on the SEC’s response to the increasing number of spot bitcoin ETF applications. Another rejection could lead to fresh legal battles with significant consequences for both sides.
