Cryptocurrency

Judges question SEC’s logic during Grayscale’s first Bitcoin spot ETF appeal hearing

A federal appeals court judge questioned the SEC’s arguments at the first hearing. appeal On March 7, we asked regulatory attorneys what more Grayscale Investments needed to offer to meet the requirements for a spot Bitcoin ETF.

Chief Justices Sri Srinivasan, Neomi Rao, and Harry Edwards of the District of Columbia Circuit Court of Appeals in Washington, DC presided over the hearing.

SEC clarification required

Grayscale’s lead attorney, Don Verilli, told a judge that the SEC’s rejection of the company’s Bitcoin ETF application was “arbitrary” because regulators approved futures-based ETPs. Bitcoin.

Verrilli further told the jury that Grayscale wants regulation and is looking for a way forward.

Meanwhile, SEC attorney Emily Paris said Grayscale’s claim was an “unsubstantiated empirical leap” and that the 99% correlation between the cash and futures markets does not prove causation. said. Parise argued that he placed the onus on Grayscale to prove causation and that the company did not provide enough “data” to allay that concern.

But Judge Neomi Rao said that while Grayscale provided a lot of information about how the two markets would work together, the SEC did not accept the company’s reasoning.

“The SEC seems to have to explain why,” Rao said. [Grayscale] The evidence they provided regarding physical Bitcoin ETFs being the same as futures ETFs is incorrect.

Parise said the SEC has “very clearly” shown how Grayscale can meet that concern by showing that the spot market price of Bitcoin is not leading the futures market price. However, the committee found that despite examining many other studies, the path suggested by Grayscale was “inconclusive.”

“At the moment, the evidence is mixed.

The judge questioned the SEC’s approval of futures ETFs under the Tookrium order, but the same reasoning cannot be applied to spot ETFs.

logic

Judge Rao said futures prices are spot-driven, and fraud and manipulation in the spot market “can be dealt with appropriately in the futures market as regulated,” the SEC previously concluded in a Tookrium order. said.

She asked Paris why the SEC rejected spot ETF applications and why that reason didn’t extend to spot ETFs. Rao asked:

“What’s the logic behind that?”

Evidence and data are lacking, Paris said, and regulators aren’t confident they can prevent fraud and manipulation in the same way they can for futures products.

Judge Rao also asked Parris if the regulator would approve a spot ETF or revoke its previous approval of a futures Bitcoin ETF if the judge disagrees with the SEC’s stance.

Parise said he was unable to answer that question on behalf of the SEC.

Posted in: Featured, Legal

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