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(Reuters) – The U.S. Securities and Exchange Commission should have approved an application from Grayscale Investments to create a spot bitcoin exchange-traded fund, a federal appeals court ruled on Tuesday, in a landmark victory for the asset manager that could pave the way for the first product of its kind.

A panel of judges in the District of Columbia Court of Appeals in Washington said the securities regulator’s denial of Grayscale’s proposal was arbitrary and capricious because the SEC failed to explain its different treatment between bitcoin futures ETFs and spot bitcoin ETFs.

The price of bitcoin, the world’s largest cryptocurrency, was last up 5.75% at $27,609 following the decision.

The ruling could be a boon for bitcoin, as a spot bitcoin ETF would provide investors the opportunity to gain exposure to the digital asset without having to purchase bitcoin via a retail exchange or custody the asset in a separate crypto wallet.

In a statement, a Grayscale spokeswoman said the decision “is a monumental step forward for American investors, the ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”

“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC,” the spokeswoman said.

The SEC did not immediately respond to a request for comment.

It rejected Grayscale’s application for a spot bitcoin ETF last June, arguing the proposal did not meet anti-fraud and investor protection standards. It cited the same reason in its denial of dozens of other applications for similar products, including those from Fidelity and VanEck.

Grayscale had argued that because the SEC previously approved certain surveillance agreements to prevent fraud in bitcoin futures-based ETFs, the same setup should also be satisfactory for Grayscale’s spot fund, since both spot and futures funds rely on bitcoin’s price.

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