JPMorgan has indicated that the U.S. Securities and Exchange Commission (SEC) could potentially face legal repercussions if it opts to decline spot bitcoin exchange-traded fund (ETF) applications. This warning comes from a report led by JPMorgan analyst Nikolaos Panigirtzoglou. Specifically, the report suggests that such rejections could pave the way for lawsuits against the SEC. Consequently, this would compound legal troubles for the already embattled agency.
Moreover, Panigirtzoglou stated that although it’s unlikely for the SEC to decline these applications, it remains within the realm of possibility. The JPMorgan analyst added that the SEC would likely wish to avoid further legal battles over this contentious issue. The report builds on last month’s case where the SEC lost against Grayscale Investments, which led to the court mandating the SEC to reconsider Grayscale’s application for a spot bitcoin ETF.
Market movement amid regulatory tensions
Besides the looming legal implications, JPMorgan also commented on recent market activities. Notably, Bitcoin has seen a near 20% uptick over the last seven days. Significantly, this surge appears to be driven more by institutional demand rather than retail investments, according to JPMorgan analysts. This change in market dynamics marks a departure from previous trends, where retail demand was the primary driver for Bitcoin’s price movements.
Additionally, JPMorgan pointed to a spike in futures positions based on CME bitcoin futures as an indicator of increased institutional interest. In contrast, Ethereum futures positions remain largely unchanged, suggesting that the bullish sentiment specifically concerns Bitcoin. Moreover, JPMorgan highlighted that the inflow of Bitcoin into larger wallets has been substantial in recent times, further underscoring the shift in demand toward institutional investors.
Hence, it seems that the regulatory landscape is converging with market dynamics in a manner that’s intensifying the spotlight on the SEC’s forthcoming decisions regarding spot Bitcoin ETFs. With the SEC already facing a court mandate to reconsider the Grayscale application, the agency now finds itself at another crossroads. Furthermore, JPMorgan anticipates that several spot Bitcoin ETF approvals could be arriving within the next few months. According to the financial institution, asset managers have been making progress in technical preparations and have amended filings to address issues such as market manipulation and the commingling of customer funds.