Last week, the SEC and Grayscale presented oral arguments before the appeals court for the DC Circuit. Judges from the United States federal appeals court inquired on Tuesday, March 7 whether the U.S. commission for Securities and Exchange was right to deny Grayscale Investment’s request for a spot BTC trading fund considering that the organization has previously authorized bitcoin futures products. There is a consensus that the appeals court will overturn the SEC’s ruling and order it to reconsider.

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The Appeals Court has the authority to reverse the SEC’s ruling, but only under specific circumstances. Despite the most enthusiastic demands of the crypto community, it cannot be reversed just because it makes logic, would benefit bitcoin, or would benefit GTBC holders. Instead, the appeals court must find that the SEC’s actions were illegal or not in conformity with the law, whether they were irrational, arbitrary, improper use of authority, or anything else.

The courts next examine the reasons to see if there is a sound relationship between the discovered facts and the conclusion taken, or the SEC carefully analyzed the factors yet clearly missed in judgment. Lastly, despite the contemporary climate of judicial enmity towards the regulatory state, the Court normally accords the SEC’s decision with a great deal of respect.

Grayscale’s primary argument is that the SEC acted arbitrarily and capriciously in approving a futures-based ETP while denying physically backed products and that the SEC’s emphasis on data-sharing agreements with important markets is a violation of the Exchange Act.

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To succeed in the second part, Grayscale must demonstrate that the SEC’s requirements for licensing ETPs mentioning underlying operations in places it does not regulate are a violation of either the Exchange Act’s text or the power authorized to it by Congress.

The Final Judgment goes in  Favour of the SEC

The method taken by the Court of Appeal revealed that they firmly thought the SEC’s judgment, even if it was perhaps incorrect, was arbitrary. It did not signal that the Court was likely to disregard Chevron Deference, though. It refers to the respect a court provides to regulatory agencies whose interpretation and application of regulations Congress has assigned to them. Ultimately, the composition of the three-judge panel favors the SEC only slightly.