10:30 AM PT -- Prosecutors admitted during the hearing that despite their initial thoughts ... they have NO evidence of human trafficking at the Orchids of Asia spa. They also said there is no longer an ongoing investigation for any such evidence.

Kraft's attorneys have long argued cops knew all along there was no evidence of human trafficking.

The hearing is getting heated ... with Kraft's team insisting prosecutors are holding the threat of releasing the surveillance videos "like a sword" over Kraft's head ... in order to force him into taking a plea deal.

Robert Kraft's legal team marched into a Palm Beach County courthouse Friday morning prepared for war -- gearing up to argue why the Asian Spa video should NOT be released to the public.

Attorneys Alex Spiro (left), Jack Goldberger (center) and William Burck (right) arrived at the courthouse early Friday morning for the case with their game faces on.

As we previously reported, Kraft's team has been fighting like hell to keep the surveillance videos under wraps out of fear it could hamper his chances of getting a fair trial.

Several media outlets have filed court docs in the hopes of getting access to the video -- but Kraft thinks the judge has a duty to block it.

Cops say they recorded graphic footage of Kraft (and other men) inside the Orchids of Asia Day Spa in Jupiter, Florida in January showing the 77-year-old receiving sex acts in exchange for money.

Kraft argued in several motions that the videos should NOT be released to the public ... saying they were not only obtained illegally -- but they'd do "irreparable harm" if they got out.

The judge is currently hearing arguments from both sides.