U.S. Spot Bitcoin ETF Approval Likely As SEC Rejection Could Prompt Lawsuits, JPMorgan Says

Rodion Krotov

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JPMorgan strategists, led by Nikolaos Panigirtzoglou, feel quite certain the U.S. Securities and Exchange Commission (SEC) could face lawsuits from applicants should the regulator decide to reject spot Bitcoin exchange-traded fund (ETF) applications currently sitting on its desk.

Although highly unlikely, the analysts believe a rejection of spot crypto ETFs is still possible.

First Spot Bitcoin ETF Could Be Coming Soon: JPMorgan

JPMorgan analysts believe the SEC will be setting itself up for legal action if it decides to deny applications for spot Bitcoin ETFs, a product yet to reach U.S. investors.

“Any rejection could trigger lawsuits against SEC, creating more legal troubles for the agency,” JPMorgan said in a Wednesday research report.

According to the Wall Street bank, a fresh legal tussle on the issue of spot Bitcoin ETF approval is not something that the SEC would be willing to embark on again.

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Notably, the regulator suffered a major loss in the case lodged by digital asset manager Grayscale Investments last year, in which the firm sued the commission for refusing to allow its flagship Bitcoin fund to convert into a spot Bitcoin ETF. With the SEC choosing not to appeal, the U.S. Court of Appeals earlier this week issued its highly anticipated order for the agency to re-review Grayscale’s application.

JPMorgan expects multiple spot Bitcoin ETFs to launch within months. The analysts further note that prospective issuers seem to be making notable progress with the SEC by making minuscule tweaks in disclosure language and laying the groundwork as the race for a spot Bitcoin ETF heats up.

Institutional Money Fuelling Bitcoin’s Recent Resurgence

Bitcoin faces a watershed moment thanks to a cocktail of technical and fundamental factors. In particular, the top cryptocurrency has gained over 18 percent in the past week alone due to renewed hopes of an imminent Bitcoin ETF approval.

A long-awaited ETF would allow larger institutions to dive into cryptocurrencies without having to deal with any of the technical know-how and custody of digital assets, similar to purchasing stocks.

JPMorgan attributes Bitcoin’s recent strength — which enabled the OG crypto to break past a critical resistance point of $35,000 — to institutional demand. This contrasts with previous quarters “when the bitcoin impulse was led by smaller wallets and thus more driven by retail investors,” the investment bank said.

Many expect the greenlighting of a spot Bitcoin ETF to lead to a rush of mainstream money into the nascent sector. Grayscale projects that such products could attract at least $14.4 billion within their first year after launch.