Federal judges questioned the SEC’s reasoning at the first appeals hearing on March 7. They asked the regulator’s attorney what else Grayscale Investments must provide to fulfil its standards for a spot Bitcoin ETF.
The hearing was presided over by the Chief Judge of the District of Columbia Circuit Court of Appeals, Sri Srinivasan, as well as Judges Neomi Rao and Harry Edwards of the District of Columbia Circuit Court of Appeals in Washington, D.C.
While the SEC has authorized futures-based ETPs, Don Verrilli, lead counsel for Grayscale, contended before the court that denying Grayscale’s application for a spot Bitcoin ETF was “arbitrary” because there is no difference between the two because they are both generated from the price of Bitcoin.
Verrilli also informed the panel of justices that Grayscale wants regulation and is seeking a way forward. Emily Parise, an attorney for the Securities and Exchange Commission, said that Grayscale’s reasoning is an “unsupported empirical leap” and that the 99.9% correlation between the spot and futures markets does not imply causality. Parise stated that Grayscale had the burden of proving causality and that the firm had not produced enough “facts” to allay its fears.
Judge Neomi Rao said Grayscale had offered much information on how the two markets interact, but the SEC rejected the company’s argument.
Rao said that the “SEC must explain why Grayscale’s evidence is incorrect” about a spot Bitcoin ETF being the same as a futures Bitcoin ETF.
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