In a significant setback for the U.S. Securities and Exchange Commission (SEC), the regulatory body’s attempt to oversee SPIKES futures, a volatility index product that competes with the widely popular VIX futures, has hit a roadblock. The US DC Court of Appeals overturned the SEC’s decision, citing it as “arbitrary and disproportionate” and lacking sufficient explanation for the exemption granted to MIAX, the exchange offering SPIKES futures.
The SEC had justified the exemption by asserting that it would promote competition in the volatility index market, which is currently dominated by Cboe’s VIX futures. However, the court disagreed, finding that the SEC failed to demonstrate how this exemption would effectively achieve that objective.
One critical aspect highlighted by the court was the SEC’s failure to address potential disadvantages stemming from the exemption. Of concern were issues like softer tax treatment and lower collateral requirements, which could potentially confer an unfair advantage upon SPIKES futures compared to the VIX futures.
Interestingly, this court ruling holds implications beyond volatility index products. The decision bears relevance to the ongoing legal battle concerning Bitcoin ETFs, notably the case involving cryptocurrency firm Grayscale and the SEC.
In a remarkable parallel to the court’s choice of words, Grayscale recently referred to the SEC’s conduct as “arbitrary and disproportionate” in their arguments against the regulatory body. Adding to the intrigue, two judges who ruled against the SEC in the SPIKES futures case are also part of the panel handling Grayscale’s dispute with the SEC.
According to insights from Bloomberg’s esteemed crypto journalist, James Seyffart, the latest court ruling seems to position two judges in favour of Grayscale’s stance in their ongoing case. This development might significantly impact the final decision regarding Grayscale’s legal battle, although an official verdict is not expected before September.
As the dust settles, market participants eagerly await the implications of this court ruling on the future of SPIKES futures and the potential ramifications for the Bitcoin ETF landscape. The SEC will undoubtedly need to reevaluate its approach to regulatory decisions, given the court’s pointed critique of the previous exemption, and all eyes will be on the upcoming Grayscale case outcome, with potential repercussions throughout the cryptocurrency industry.
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