Legal Challenges Await Post-Bitcoin ETF Approvals, Experts Sound The Alarm

As the deadline approaches for the US Securities and Exchange Commission (SEC) to approve, deny, or potentially delay the long-awaited Bitcoin ETF applications, intriguing theories have surfaced regarding the potential legal challenges that may arise. 

Major asset managers worldwide have submitted these applications, and if forecasts hold, approvals between January 5 and 10 could lead to significant legal repercussions for both the applicants and the SEC.

SEC Faces Dilemma Over Spot Bitcoin ETF Approvals

An SEC insider, known under the pseudonym AP_Abacus (Andrew) on the X platform (formerly Twitter), has hinted at the existence of “murmurs” within legal circles regarding post-Bitcoin ETF approvals. 

According to Andrew, the SEC’s stringent cash requirement may pave the way for solid legal challenges from one or several firms. While the SEC has commonly followed the “in kind” commodity ETF standard, introducing retail risk to Spot Bitcoin ETFs has raised concerns.

Interestingly, Andrew suggests that multiple conversations have led to speculations that crypto asset management firm Grayscale (GBTC) could potentially initiate legal action first. 

Legal expert and supporter of XRP Fred Rispoli has provided his perspective on the matter. Rispoli suggests that the SEC is navigating a delicate balance between satisfying its clients, primarily large banks, and avoiding potential backlash from appellate courts for not promptly approving a Spot Bitcoin ETF. Rispoli asserts that the SEC’s “strategic delay” may be the best solution to mitigate these challenges.

The implications of potential legal challenges following Bitcoin ETF approvals are significant. If these challenges materialize, they could introduce further delays and uncertainties in the regulatory landscape. 

Applicants may face prolonged legal battles, impacting their plans and strategies in the emerging cryptocurrency market. Simultaneously, the SEC could face legal scrutiny and potential criticism for handling Bitcoin ETF applications.

Multiple Bitcoin Spot ETF Approvals By January 10?

Cathie Wood, the founder and CEO of ARK Investment Management, recently shared her positive outlook on approving Bitcoin spot ETFs. In an interview with CNBC, Wood expressed her belief that multiple Bitcoin ETFs could receive approval by January 10, 2024. 

Wood explained the concept of “selling on the news,” a term traders use to describe the phenomenon where investors anticipate an event, drive up prices in anticipation, and sell their holdings once the event occurs. 

Wood suggested that those who have already experienced substantial profits from Bitcoin may choose to sell their positions following the news of Bitcoin ETF approvals. 

During the interview, Wood also shared positive updates on the discussions between industry players and the US SEC regarding Bitcoin spot ETFs. Wood expressed optimism, noting that the conversations have been “very positive.” 

Moreover, Wood mentioned a noticeable shift in sentiment within the past month to six weeks, indicating a change in the regulatory landscape. 

While specific details were not provided, Wood’s statement suggests that recent developments have contributed to a more favorable environment for Bitcoin ETF approvals. 

Featured image from Shutterstock, chart from TradingView.com