The U.S. Securities and Exchange Commission (SEC) suffered a setback in its attempt to regulate SPIKES futures, a volatility index product that competes with the popular VIX futures.
The US DC Court of Appeals overturned the SEC decision, which exempted MIAX, the exchange offering SPIKES futures, on the grounds that the decision was “arbitrary and disproportionate” and lacked adequate explanation.
The SEC had argued that the exemption was necessary to encourage competition in the volatility index market dominated by VIX futures offered by Cboe. But the court disagreed, saying the SEC failed to show how the exemption would achieve that goal.
The court also noted that the SEC did not address some of the potential disadvantages of the conveniences, such as softer tax treatment and lower collateral requirements that could give SPIKES futures an unfair advantage over VIX futures.
Two Judges Decide in SEC's Lost Case, Will Also Decide in Grayscale Case
This decision has relevance regarding Bitcoin ETFs, and in particular the legal battle that cryptocurrency company Grayscale is waging against the SEC.
Grayscale recently used the term “arbitrary and disproportionate” in reference to the SEC's conduct, in the same vein as the judge, in his article explaining his arguments against the SEC. In addition, two of the three judges in the case the SEC lost today are also hearing Grayscale's case against the SEC.
Bloomberg crypto journalist James Seyffart argued that with the latest development, two of the three judges who will make the decision in the Grayscale case are on Grayscale's side.
It is thought that the decision in the Grayscale case will not be released before September.
*Not investment advice.
