Crypto: has the “arbitrary and capricious” SEC lost the battle?

Gary Gensler

SEC Chairman Gary Gensler – Credit: sec.gov

With Coinbase and Binance still to contend with, the SEC a tripped in two cases (XRP and Grayscale). Visit usual arguments of the regulator with regard to crypto are they definitely defeated ?

Two judgments were particularly eagerly awaited by the industry crypto and the U.S. Securities and Exchange Commission. And for each, the magistrates did not fully endorse the the SEC’s argumentsin part or in full.

Even more than with Ripple and its XRP token, the regulator suffered a setback against Grayscale to whom he refused to requalify his Bitcoin fund at ETF. For one of the three judges, “the refusal of Grayscale’s proposal was arbitrary and capricious”.

SEC position not blindly followed

The SEC will have to revise its copy and, above all, its arguments. Here’s something to give weight to the counter-arguments of industry players crypto. Now, two of them have a scheduled appointment with the finance authority: Coinbase and Binance.

The SEC’s two recent setbacks are sure to fuel the industry’s rhetoric and lines of defense. And when it comes to enforcement, justice has the last word, not the SEC and its chairman. Gary Gensler.

The decisions show that courts will not blindly accept the SEC’s conclusions on the application of securities laws to crypto-currencies,” comments to Bloomberg a former advisor to the authority.

Confrontation, an effective line of defense

Of course it is, the regulator’s failure is to be moderated. The judgments were rendered at first instance, and the SEC still has recourse to appeal and to the US Supreme Court. In the Grayscale case, it has 45 days to appeal.

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The judges’ decisions nevertheless constitute a signal and suggest that the SEC’s position can be challenged, with a good chance of success.

This decision sends a message to digital asset players: those with the appetite and resources to challenge the SEC have the opportunity to do so successfully,” analyzes Daniel Tramel Stabile, partner at Winston & Strawn.

Positive signals for crypto investors

The SEC is not all-powerful, with Judge Neomi Rao instead denouncing the arbitrariness of her decision against Grayscale. For crypto investors, the ruling was seen as an encouraging signal, and not just for Bitcoin.

The digital asset manager can hope to bounce back. Visit Grayscale Bitcoin Trust saw its $17.4 billion valuation jump following the ruling. Previously flat, it recorded its biggest rise since July 2021.

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