Brief Spot and Futures Markets Explainer
If you’re not familiar with spot and futures markets, keep reading. But if you already know about traditional financial markets and recently approved bitcoin futures, feel free to skip ahead.
- A spot market is where you can exchange cash for bitcoin and get immediate delivery.
- Derivatives markets derive their value from the underlying spot market, even though they are not traded on that market.
- Futures are contracts to buy or sell assets at predetermined prices on specific later dates.
- Investors often use futures to hedge against risk and trade on commodity futures exchanges.
- The SEC has denied proposals to list bitcoin ETPs in the past, but recently approved the listing of bitcoin futures ETPs.
How the Court Ruled and Why
Grayscale argued that the SEC acted arbitrarily in denying their ETP listing while approving similar bitcoin futures ETPs. The court agreed, stating that the exposure to the spot market price was nearly identical. The SEC’s attempt to distinguish the ETPs using the significant market test was rejected by the court. The court concluded that similar cases should be treated similarly, and since the SEC did not adequately explain why it approved futures ETPs but not Grayscale’s, the court granted Grayscale’s petition for review and vacated the SEC’s previous order.
What Happens Next
Both Grayscale and the SEC have 45 days to appeal. It is unlikely that Grayscale will appeal, but the SEC has yet to respond. If the SEC appeals, the case would either go to the U.S. Supreme Court or an en banc panel review. If the SEC does not appeal, they will have to review Grayscale’s application again.
What Should You Do in the Meantime?
Due to regulatory uncertainty and increased SEC enforcement actions, it is crucial to consult legal experts well-versed in digital assets. Consulting with the lawyers at Kelman PLLC can ensure compliance with applicable laws and regulations and avoid legal pitfalls and expenses.
Fill out the contact form to set up a free 30-minute consultation.
Hot Take
Understanding spot and futures markets is essential for crypto readers. The recent court ruling in favor of Grayscale highlights the need for consistency in SEC decisions. While the case is not over, consulting legal experts is crucial in navigating the evolving regulatory landscape.
By
By
By
By
By
By