SEC Receives Grilling Over BTC ETF Rejection in Court

• Judges hear oral arguments in Grayscale Investments lawsuit against the SEC over rejection of Bitcoin spot ETF application.
• Former Solicitor General Donald Verrilli Jr. represented Grayscale and SEC’s Senior Counsel Emily Parise argued for the SEC before Chief Judge Sri Srinivasan and Judges Neomi Rao and Harry Edwards in the District of Columbia Circuit Court of Appeals.
• The judges posed questions about the SEC’s stance, leading to speculation about their leaning.

Oral Arguments in Grayscale Investments Lawsuit Against SEC

A panel of three judges heard arguments from both sides on March 7th in a lawsuit brought by Grayscale Investments against the United States Securities and Exchange Commission (SEC) over its refusal to approve a Bitcoin (BTC) spot exchange-traded fund (ETF). Representing Grayscale was former solicitor general Donald Verrilli Jr., while senior counsel Emily Parise spoke for the SEC before Chief Judge Sri Srinivasan, Judges Neomi Rao and Harry Edwards in the District of Columbia Circuit Court of Appeals.

Verrilli’s Argument

Verrilli opened by stating that “the fundamental problem with the order is that it contradicts previous SEC orders giving the green light to Bitcoin futures ETPs that pose the same risk of fraud and manipulation and have in place the same CME [Chicago Mercantile Exchange] surveillance mechanism to protect against those risks.” The SEC has previously approved investment products from Teucrium, ProShares, VanEck and Valkyrie linked to BTC futures.

Parise’s Counterpoint

Parise argued that these offerings are not comparable with what Grayscale proposed as they lack identical surveillance mechanisms due to spot markets underlying assets being “fragmented and unregulated” unlike CME which is regulated by Commodity Futures Trading Commission (CFTC). She also dismissed an argument stating that Bitcoin spot and future markets move together 99.9% of time as it is unclear whether the futures market leads or lags when impacted by fraud or manipulation.

CME Surveillance as Proxy

For its proposed product, Grayscale suggested using CME surveillance as a proxy for surveying spot markets. This argument was based on data showing that BTC spot & future prices correlate at 99.9% once-a-day regardless intraday prices according to Parise.

Judges’ Questions & Speculations

The judges posed significantly more questions towards Parise’s stand leading to speculations about their leaning towards either side even though no decision was made during this hearing session itself .

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