In a recent development that has taken the place by storm, the U.S. Securities and Exchange Commission’s (SEC) ruling concerning SPIKES Index has been overturned by the D.C. Circuit, labelling the order “arbitrary and capricious”. The controversial order issued by the SEC in 2020 had exempted SPIKES Index, a stock volatility index, from the definition of security futures, effectively ridding it of associated heavy taxation and regulatory requirements.
The original aim of this relief, as stated by the SEC, was to stimulate competition among volatility indexes. However, the recent overturn by the court tells a different story. Chief Judge Sri Srinivasan highlighted that the SEC fell short in explaining its rationale and didn’t sufficiently consider a key aspect of the contentious issue. Add to this the SEC’s failure to consider market participants’ potential confusion due to its exemption grant.
Post this decision, SPIKES Index futures are transitioning from “futures” to “securities futures” territory, providing market participants a three-month window to wind down their transactions. If this verdict is anything to go by, it may be a harbinger for the direction of impending legal tussles between cryptocurrency firms and the SEC.
Following this ruling, some have suggested that the SEC is susceptible to losing court cases, like the one involving Grayscale who are challenge the SEC’s decision that denied their request to convert Grayscale Bitcoin Trust to a spot Bitcoin exchange-traded fund.
In this legal labyrinth, a pseudonymous lawyer, “MetaLawMan”, has noted that two of the judges from the panel are also overseeing Grayscale‘s SEC challenge. While the proceedings are currently in the process, the SPIKES Index decision potentially serves as a lesson and warning for regulators dealing with complex and rapidly evolving markets, like cryptocurrencies.
In conclusion, the dynamics surrounding the SEC’s jurisdiction and rulings have been thrust into the forefront again. The overturning of the ruling demonstrates the need for a more adaptable and flexible regulatory structure that could effectively deal with market evolutions without causing any confusion or unintentional stumbling blocks for market participants.
Source: Cointelegraph
