A spot bitcoin ETF is much closer to reality, but investors aren't quite there yet

cnbc.com:

Well, now the SEC is in a real pickle. 

The U.S. Court of Appeals for the D.C. Circuit sided with Grayscale in a lawsuit against the SEC, greatly improving the chances that a bitcoin exchange traded fund will be approved. The SEC had earlier denied Grayscale's application to convert its Grayscale Bitcoin Trust to an ETF. 

The problem for the SEC is that the court has squarely rejected the very basis on which the SEC has been denying a spot bitcoin ETF for the past several years. 

The SEC has said it can't approve a spot bitcoin ETF because there isn't a regulated crypto market of sufficient size to prevent manipulation. 

But the court called out the SEC over its prior approval of a futures-based bitcoin product.  The court said, in essence, Hey, you approved a futures-based bitcoin product. The futures and the spot market are «like» products. If you approve one, you have to approve the other. 

«Because the spot and futures markets for bitcoin are highly related, it stands to reason that manipulation in either market will affect the price of bitcoin futures,» the court said. 

«The denial of Grayscale's proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,» the appeals court said. 

The tragedy of this ruling is that it does nothing to alleviate the concern over possible manipulation, which has not gone away. The court simply said that the SEC has erred in approving one ETF (bitcoin futures) and not approving another (spot bitcoin). 

What's next?  A lot depends on whether SEC Chair Gary Gensler wants to fold or fight to the end. 

The SEC has several choices to make. 

The first is whether it wants to appeal the case, in which case the order would be stayed