Federal appeals court judges in Washington, D.C., grilled the U.S. Securities and Exchange Commission on its decision to reject a proposed Bitcoin exchange-traded fund when it had earlier approved a similar product based on Bitcoin futures, Bloomberg News reported. Grayscale Investments LLC wants to convert its $14 billion Bitcoin trust, the largest investment vehicle tied to the No. 1 cryptocurrency, into an ETF. But the SEC rejected the plan in June, saying crypto markets are too ripe for fraud and manipulation. Grayscale sued, asking the DC Circuit Court to overturn a decision the company called arbitrary and discriminatory because the SEC had already approved ETFs that track Bitcoin futures. Chief Circuit Judge Sri Srinivasan, one of three on the appellate panel, asked during a hearing Tuesday why it wouldn’t always be the case that manipulation of the spot Bitcoin market would show up in futures. “It is just going to follow like the night follows the day,” Srinivasan said while questioning an SEC lawyer. Some of the judges pushed the SEC to explain why Grayscale is wrong to argue the risks of fraud and manipulation in the spot Bitcoin and Bitcoin futures markets are the same because they both rely on the same underlying pricing.
