In the world of finance, there is a revolution occurring. Bitcoin, which was traditionally available only through a complicated process (think digital wallets) or unregulated exchanges (think FTX or Binance), may soon be coming to a broker or investment advisor near you. Currently pending before the SEC, with an expected decision date of January 10, 2024, is the answer to a very important question: Will brokers and investment advisors be permitted to market and sell the equity equivalent of Bitcoin, commonly referred to as "Spot Bitcoin ETFs"? In other words, can interests in Bitcoin be bought and sold like any other registered security? All signs point to yes, which would represent a significant shift in the U.S. regulatory and investment environment.

Historically, the SEC has rejected of all Spot Bitcoin ETF's applications, citing concerns about market manipulation and investor protection. However, recent developments suggest a momentous shift. For example, the SEC has been working collaboratively with Grayscale to convert their Bitcoin trust into a Spot ETF, after the SEC lost a major lawsuit on this issue, which spurred financial giants like Fidelity, and other major firms, to apply for SEC approval for their own Spot ETF's.

The approval of a U.S. Spot Bitcoin ETF would mark a pivotal moment, providing Bitcoin with enhanced legitimacy and regulatory certainty. This revolution is particularly significant for traders and investors, as firms that were previously prohibited from diving into the digital currency market might now accept and indeed offer Bitcoin ETF's as a viable asset class. Moreover, the robust oversight and investor protections offered by established brokers and investment advisors, within a familiar investment structure, would substantially increase Bitcoin's investment appeal.

Finally, if the big investment giants are authorized by the SEC to market their own Spot Bitcoin ETF, their reputation and market share will presumably influence investment managers and advisors to add these ETF's to their investment offerings.

In a nutshell, if the SEC permits interests in Bitcoin to be bought and sold, the SEC is essentially authorizing a Bitcoin IPO in which everyone can participate.

Lara Treinis Gatz is a partner in Reed Smith’s Global Regulatory & Investigations practice group and has particular experience in matters involving SEC inquiries, securities fraud, Foreign Corrupt Practices Act (FCPA) violations, digital currency, health care fraud, cyber-crime, bank fraud, money laundering and Bank Secrecy Act (BSA) violations.