Bitcoin ETF Rejections Under ‘Review’ by SEC
Yesterday, nine Bitcoin ETF rejections were issued by the U.S. Securities and Exchange Commission. In a possible change of heart, the SEC has placed the Bitcoin ETF denials under review.
Bitcoin ETFs Still on the Horizon
The U.S. Securities and Exchange Commission (SEC) is currently reviewing its disapproval of nine Bitcoin ETF proposals by ProShares, Direxion and GraniteShares, according to three letters sent by SEC secretary Brent Fields.
In the letters, addressed to NYSE Group Senior Counsel David De Gregorio, Fields states that “the Commission will review the delegated action” on all three companies’ Bitcoin ETF applications.
It is still unclear when the review will be completed.
“This letter is to notify you that, pursuant to Rule 43 I of the Commission’s Rules of Practice, 17 CFR 20 I .43 1, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise. The Office of the Secretary will notify you of any pertinent action taken by the Commission.”
SEC Commissioner Hester Peirce took to Twitter to announce the news on Aug. 23. Notably, Peirce expressed dissent toward the SEC’s recent rejection of the Winklevoss Bitcoin ETF proposal.
In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff’s action, as will now happen here.
— Hester Peirce (@HesterPeirce) August 23, 2018
Details of Bitcoin ETF Rejections
In both orders, the SEC cited failure to prevent manipulation and fraud as well as failure to prove Bitcoin markets are “markets of significant size” as reasons for rejection.
This was similar to the reasoning provided by the SEC when they issued a denial of the Winklevoss Bitcoin ETF.
In the filing for ProShares, the SEC wrote:
“…the Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices. Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’”
These rejections were widely expected by the wider community, with most experts predicting a flat-out denial. For example, ProShares withdrew the majority of its previous applications in January, indicating lack of confidence in their proposal.
There are still several Bitcoin ETF applications under review by the SEC. The VanEyck-CBOE Bitcoin ETF proposal is set for a decision on Sept. 30.