Dispatch #130: Federal Judges Overrule the SEC

Mar 11, 2023 3 min read

Dispatch

In this patch of your weekly Dispatch:

Federal judge overrules the SEC
GBTC discount declines
NFT artist in the Louvre

The Big Idea

The US Legal System Is Handing the SEC Setbacks

The SEC has emerged as the most aggressive crypto regulator and seems to be especially on the warpath following the collapse of FTX. Yet in their flurry of enforcement actions, they’ve still not done some basic things, like, explain what makes certain crypto assets securities.

Not once but twice this week, US federal judges revealed themselves to be less than impressed with the SEC’s approach.

In the first hearing around Grayscale’s lawsuit against the SEC for denying its application to convert its Bitcoin Trust to a spot ETF, judges seemed to agree with Grayscale that it was inconsistent to have approved a futures-based Bitcoin ETF but deny spot ETFs that use the same price indices.

Then in the case of Binance.US's purchase of Voyager Digital assets, the judge overruled the SEC’s objection to the case.

So far, 2023’s best regulatory process seems to be coming through the courts. 📜

The Latest In…

Crypto Markets

Last weekend and the beginning of this week were eerily quiet in crypto markets. Bitcoin had been rangebound around $22,400 for days.

Two events however seemed to have driven crypto lower. The first was Federal Reserve Chairman Jerome Powell's comments before the Senate and Congress when he hawkishly suggested that a 50bps interest rate rise was possible at the next FOMC meeting. The second was Silvergate Bank (to which Nexo has no exposure) announcing that it would be winding down. A day later, another crypto-friendly lender, Signature Bank, distanced itself as having “limited digital-asset” exposure in its latest financial filing.

The Latest In…

NFTs

Ordinals continued to drive the conversation, but that wasn’t the only thing happening in NFT land.

Over the weekend, Yuga Labs held their auction for their first Ordinals collection “Twelvefold,” making 735 BTC ($16.5M) in the process.
Artist Claire Silver, who uses AI in her NFT art, is debuting her latest collection at the Louvre.
To celebrate International Women’s Day, Sotheby’s teamed up with UnicornDAO to host an NFT auction “My Body, My Business” with a portion of the proceeds going to organizations like Planned Parenthood.

The Week’s Most Interesting Data Story

GBTC Discount Declines

In the Big Idea, we discussed how a group of federal judges seemed inclined to agree with Grayscale’s position in their lawsuit against the SEC. It seems that markets agree with us that the hearing was a major boon to Grayscale’s cause.

Since mid-February, GBTC had been trading at a 45-50% discount to the price of BTC, but that discount closed by about 10% in the days following the hearing. Given that the Grayscale Bitcoin Trust has about 3% of the circulating supply of BTC locked up, this particular scenario matters for more than just Grayscale and their parent company DCG.