Grayscale Wins ETF Court Case Against SEC; Congress On Biden Administration Crypto Tax Rules

Grayscale defeats SEC

In a long-anticipated, court case decision, Grayscale won its “Bitcoin ETF” case in a 3-0 vote among judges of the U.S. District Court of Appeals in D.C.

Read the transcript (PDF).

The Court did not mince words about the The Securities and Exchange Commission’s (SEC) efforts – or lack thereof –, “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs (Exchange-Traded Products) but not Grayscale’s proposed bitcoin ETP. In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful,” according to CNBC. Read more.

The Commission had been trying to prevent the conversion of Grayscale’s Bitcoin Trust into a Bitcoin Exchange-Traded Fund (ETF). Bloomberg Intelligence analyst James Seyffart tweeted on X about the text from the decision saying, “This is a complete and utter rebuke of all the SEC’s spot Bitcoin ETF denial orders. There is no wiggle room — basically all of the SEC’s arguments are shot down here.”

Seyffart points out that next steps for the SEC and the Biden Administration is to continue to make efforts to scuttle any approval of a Bitcoin ETF by wrapping the SEC argument around custodial inadequacies. Read his Tweet thread.

more tips:

Opinion: The Real Reasons the Grayscale Bitcoin ETF Decision Matters – CoinDesk

NFTs and securities

Monday’s news that the SEC had settled with a company called Impact Theory sent shivers through the NFT (non-fungilble token) world.

According to the Commission’s press release, Impact Theory initiated an unregistered securities offering with its 2021 NFT issuance: “The order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key (NFT) as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts. Among other things, Impact Theory emphasized that it was ‘trying to build the next Disney,’ and, if successful, it would deliver ‘tremendous value’ to Founder’s Key purchasers.” Read more.

Impact Theory was ordered to pay $6.1 million as well as required to set up a fund that returned money to NFT investors.

The ruling was along party lines as SEC Chair Gary Gensler, Commissioners Caroline Crenshaw and Jaime Lizárraga – the 3 Democrats of the Commission – voted for the settlement. But, the two Republican Commissioners – Hester Peirce and Mark Uyeda – did not agree and issued a dissent. Wrote Commissioners Peirce and Uyeda: “We understand why the Commission was concerned about this NFT sale. (…) This legitimate concern, however, is not a sufficient basis to pull the matter into our jurisdiction.” Read their statement.

more tips:

In a first, the SEC says NFTs sold by an L.A.-based entertainment firm are securities – Leo Schwartz in Fortune

Fed rules and Congress

An August 23 letter sent to Federal Reserve Chairman Jerome Powell, a Republican, was unveiled by three Republican leaders of the House Financial Services (HFS) Committee on Monday and asked for clarification on the “Fed’s efforts to undermine Congress’ progress on legislation to establish a regulatory framework for payment stablecoins through recent supervision and regulation letters.” Read the letter.

HFS Committee Chair Patrick McHenry (R, NC), the HFS Vice Chair and Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee, French Hill (R, AR), and the Chair of the Oversight and Investigations Subcommittee, Bill Huizenga (R, MI), asked in Monday’s letters about Fed’s motives of new rules announced August 8 which amplifies oversight of any banks engaged in crypto. Or put another way, the Fed effectively told banks, “Don’t touch crypto. We don’t trust it in the U.S. financial system.”

Answers to a long list of questions is due September 29.

Rep. Hill tweeted news of the letter on X saying, “The Fed has chosen to effectively prevent banks from issuing payment stablecoins.”

Treasury’s crypto taxes

Last Friday’s announcement by the U.S. Treasury on a new crypto tax proposal brought questions from Senator Cynthia Lummis (R, WY).  Though she welcomed rulemaking on the topic, “I have serious concerns about the rule’s potential impact on decentralized crypto exchanges and its treatment of U.S.-dollar backed stablecoins,” she tweeted Monday. Read her brief statement on X.

Then yesterday, House Financial Services Committee member and crypto gadfly Rep. Brad Sherman (D, CA) issued a press release heralding what he called the “Biden Administration’s” new crypto tax rule proposal saying in part, “Cryptocurrency means ‘hidden money’ – its goal is right there in the name… Pleased to see the U.S. Treasury Department propose rules today that require crypto platforms to report its customers transactions to the IRS – a measure Rep. Stephen Lynch and I urged for earlier this summer.” Read the statement.


Cato Institute will be producing a full-day conference on September 7 titled, “Staying Ahead of the Curve: Crypto Regulation and Competitiveness.” Scheduled speakers include Senator Bill Hagerty (R, TN) – who will participate in a 25-minute fireside chat – and Commodity Futures Trading Commission (CFTC) Commissioner Caroline PhamSee the full agenda.

still more tips

The ‘Fidelity Mafia’ Behind Big Crypto: The mutual-fund powerhouse was a bitcoin pioneer and built a deep talent pipeline for the industry (August 27) – The Wall Street Journal

Genesis, DCG reach in-principle deal with creditors – court filing – Reuters

Crypto Giant Binance Considers Russia Exit – The Wall Street Journal