The U.S. federal appellate court judges oversee the decision of the U.S. Securities and Exchange Commission (SEC) that rejected the application that Graysacle Investment made for a spot Bitcoin exchange-traded fund.
Grayscale Investments, the largest Bitcoin Fund, hopes that the final ruling would let it become an ETF.
The company had applied to convert Grayscale Bitcoin Trust (GBTC), its flagship spot into an exchange-traded fund (ETF). The application made on last June was turned down by the SEC quoting it did satisfy the anti-fraud and investor protection standards.
The hearing was heard by a panel of judges in the District of Columbia Court of Appeals in Washington. The court pointed out that the SEC had earlier approved particular surveillance agreements in order to prevent fraud in Bitcoin futures-based ETFs.
The panel of judges included Judge Neomi Jehangir Rao, Judge Padmanabhan Srikanth Sri Srinivasan, and Judge Harry T. Edwards.
The question raised by the court was as both future funds and spot funds depend on the price of Bitcoin then if it approves future funds and not spot funds whether that would pose as a major double standard.
Judge Neomi Rao said that it seemed like it was fine for an agency to say okay but the court needs some more information. Rao continued that it seemed there was quite a bit of information on the combined functioning of the markets although the SEC has not offered any explanation for the reason that the petitioners are deemed wrong.
She stated that the future prices of Bitcoin were a derivative of the asset’s spot price which was subject to changes 99.9 percent of the time.
Donald Verrilli Jr., the lead counsel of Graysacle, argued that a spot Bitcoin ETF would better protect investors because it would give the benefit of oversight on the basis of the surveillance agreements set up with the trading place of the Bitcoin futures, the Chicago Mercantile Exchange (CME).
He said that since the SEC has given green light for other futures-based ETFs to trade in the U.S., the now decision to not sanction Grayscale’s application to transform into a spot market Bitcoin ETF comes as a conflict.
Verilli Jr. used the words the definition of arbitrary decision-making to while he talked about the SEC’s decision.
Emily True Parise, the SEC’s senior litigation counsel argued in the court that the regulator, that is the SEC, lacks data to determine whether those surveillance agreements could also take up potential manipulation and fraud in the spot markets.
Parise pressed that the Bitcoin futures had only started trading in 2017 and that the evidence was just mixed at that point. She added that the evidence was bi-directional at times.
The SEC and the crypto industry have been locking horns recently over the former’s regulations to approve digital asset products that included the offer investors returns on certain digital tokens.
Michael Sonnenshein, the Chief Executive Officer of Grayscale, expects a final ruling on the case to come as soon as possible. Sonnenshein continued that he anticipates that the verdict of the court would be in favor of Grayscale.
Previously in January, he had stated in a media exchange that the company would appeal the case if the court backed the stand of the SEC to reject the company’s proposal for a Bitcoin ETF.
ProShares Bitcoin Strategy (BITO) is an example of a Bitcoin futures holding ETF that got approval from the SEC.
The Bitcoin ETF applications from Graysacle was being rejected for years by the SEC.
In 2016, the company submitted an application to convert GBTC into an ETF.
Also Read:- Shark Tank’s Mark Cuban Makes $400,000 Bet On Fiona Co Chan’s Youthforia
Grayscale Bitcoin Trust was launched in 2013 and has 14 billion US dollars worth of assets under management (aum).
The shares of GBTC trade at a value less than the underlying value of the Bitcoin by Grayscale under its trust partly because of the structure of the product. This restricts the shares from being redeemed for Bitcoin.
Grayscale Investments is a digital currency asset management company and its parent company is Digital Currency Group, a venture capital company in America.
According to the data on March 7, 2023, the shares of GBTC were traded at a discount of 42 percent relative to the Grayscale’s aum. The shares further soared an additional 7.6 percent to reach 12.68 Us dollars while the oral arguments were going on in the federal appellate court.
The SEC has only been approving Bitcoin ETFs based on futures contracts and not Bitcoin ETFs based on spot funds. Another spot-based Bitcoin ETF application rejected by the SEC was the one of Winklevoss Twins in 2013.
The authorities of the SEC stated that it had implemented mandatory regulations to protect investors in the U.S. and turning down the spot-based applications was a part of it.
Read More:- Sparkles NFT Goes Live On Flare Network; Here’s Everything You Need To Know
