A DC Circuit judge hammered SEC lawyers as they defended their decision to disapprove Grayscale’s move to spot bitcoin ETFs.
Grayscale Investments LLC participated in oral arguments on Tuesday in the United States Court of Appeals for the D.C. Circuit in connection with its attempt to have the popular Grayscale Bitcoin Trust (GBTC) converted into a spot bitcoin exchange-traded fund (ETF). At this oral argument, the three presiding judges appeared to side with Grayscale on the position.
The US Securities and Exchange Commission (SEC) has repeatedly rejected previous attempts to introduce spot bitcoin ETFs. This has led to Grayscale suing the SEC, alleging that the decisions have been arbitrary and inconsistent with the Commission’s decision to approve Bitcoin futures ETFs.
In today’s arguments, presiding judges Judge Sri Srinivasan and Judge Neomi Rao repeatedly prodded SEC Senior Counsel Emily Parise about the SEC’s differentiation between futures ETFs and spot bitcoin ETFs.
“[The prices] move together 99.9% of the time. So where are the gaps, in the Commission’s view? asked Hakim Rao.
The SEC’s response was that correlation does not equal causation, with lawyers explaining that the main empirical question is whether fraud and manipulation in the spot market affect futures in the same way that futures market surveillance can be relied upon. Without the missing empirical pieces, SEC counsel said, the agency is unsure whether it can rely on CME oversight in the future to approve spot ETFs.
Questions led to pontificating that the SEC did not provide sufficient evidence to explain its decision, with Judge Rao telling Parise, “The SEC did not provide an explanation that the petitioners were wrong.”
The full record of the question can be heard here.