Elliot Stein, a senior litigation analyst for Bloomberg, recently appeared in an episode of Unchained Podcast hosted by Laura Shin.
The analyst gave his insights into Grayscale’s lawsuit against the Securities and Exchange Commission over the latter’s rejection of a spot Bitcoin ETF application.
Stein revealed that in the latest hearing held on 7 March, Grayscale argued that there was an inconsistency in the standards that the SEC was applying because they approved applications for a Bitcoin futures ETF but have consistently rejected applications for a spot bitcoin ETF.
Grayscale argues that since the underlying assets for both products are the same and derive their price from Bitcoin, the wall street regulator should treat the products similarly, but that is not the case.
Grayscale has alleged that the regulator’s behavior is arbitrary and capricious and as such, violates U.S. federal law.
The SEC responded by arguing that it had been applying the same standards but the products were, in fact, different.
According to the SEC, the Bitcoin futures market is regulated by the CFTC which makes it different from the spot BTC ETF, which they believe has no regulatory oversight.
Prior to the hearing, Elliot Stein believed that the SEC had an edge in the lawsuit and that their odds of winning were much more than that of the GBTC issuer since courts tend to defer to federal agencies because they are experts in their respective fields.
However, after hearing the latest arguments, the Bloomberg analyst gave Grayscale a 70% chance of winning the case.
In the event that Grayscale wins the lawsuit, approval for its spot Bitcoin ETF may not come immediately. According to Stein, the application will most likely be sent back to the SEC for further review.
The analyst stated that the language in the court’s ruling will decide the fate of Grayscale’s spot Bitcoin ETF.
In case the ruling goes against Grayscale, it may be possible that in the spirit of ensuring consistent standards, the permission for Bitcoin futures ETFs may be revoked.
Speaking on SEC’s other high-profile legal battle in the crypto space, the Bloomberg analyst stated that their verdicts will be instrumental in shaping regulatory policy for crypto in the United States.
Some of these cases include SEC v. Ripple, which revolves around XRP’s alleged status as a security, and the SEC’s lawsuit against former Coinbase manager Ishan Wahi, where the regulator labeled nine of the tokens involved in the case as securities.
Lastly, Stein also added that the case against Terraform Labs will impact the regulator’s treatment of stablecoins.