A US Court Overturns SEC’s Decision on SPIKES Futures

The US Court of Appeals for the District of Columbia has recently overturned an SEC ruling that would have treated instruments on the SPIKES index, an indicator of stock volatility, as futures instead of as securities futures.

In their review of the case, the three-judge panel called the Commission’s order “unreasonable and arbitrary,” stating that the agency failed to provide an adequate explanation and disregarded the potential for confusion among market participants.

The court decision means that SPIKES index instruments are now classified as “securities futures,” incurring the high taxes and other regulatory requirements associated with the securities industry, rather than being excluded from such regulation.

All market participants have three months to close out their positions.

This ruling is especially pertinent for investors considering the ongoing Grayscale case, where the SEC is attempting to reject an application to convert GBTC into a spot bitcoin-ETF. As analyst Eric Balchunas notes, this decision signals that the case could go in the favor of investors, ultimately challenging the Commission’s authority.