The US equities market is awaiting the decision by the US Securities and Exchange Commission (SEC) on several spot Bitcoin exchange-traded fund (ETF) applications, which could be a game-changer for crypto markets. SEC chair Gary Gensler recently said the commission was “taking a new look” at spot Bitcoin ETF applications after the US Court of Appeals for the District of Columbia rebuked the regulator’s handling of an application from digital asset manager Grayscale.

The decision could radically shift institutional sentiment toward cryptocurrency and smooth the path to the regulatory clarity many in the industry have been demanding. But despite hopes of increased institutional allocations, the SEC’s previous treatment of applications suggests it may not be a foregone conclusion that it will favor requests by blue-blooded Wall Street investors, such as global asset manager BlackRock.

Before the recent court ruling, the SEC denied several spot Bitcoin ETF applications, setting the scene for a repeat adjudication that could add to the cryptocurrency’s volatility. There have been more than a dozen spot Bitcoin ETF applications, including those of BlackRock and Grayscale. Other notable investors include ARK Invest, Bitwise, Fidelity, Franklin Templeton, Invesco, Valkyrie and VanEck. 

Still, even if the SEC grants approval, the volume of applications presents a dilemma for the SEC. Technically, it has a 240-day comment period that is due to expire on January 10 regarding ARK Invest’s application. However, piecemeal approval of multiple applications could result in accusations of favoritism, leading some analysts to conjecture the SEC might approve all applications at once.

The SEC suffered several legal setbacks and attracted criticism from sitting judges, prompting complaints that the regulator has a policy of “regulation by enforcement.” In a landmark ruling last year, the US District Court for the Southern District of New York ruled that Ripple Labs XRP cryptocurrency token was not a security, despite vociferous claims by the SEC to the contrary. US investors hope that a favorable ruling from the SEC on spot Bitcoin ETFs will regain some of the ground lost to other jurisdictions that have adopted a more proactive approach to cryptocurrencies. In August, Euronext Amsterdam listed Europe’s first-ever spot Bitcoin ETF.