The US Securities and Exchange Commission (SEC) has rejected nine Bitcoin exchange-traded fund (ETFs) proposals from three applicants, saying they fail to meet various requirements. However, it highlights that the main issue is they don’t comply with the rules aimed at preventing fraud and price manipulation.
The deadline for the SEC’s decision has come one day early. The regulatory body explains that neither applicant complied with the SEC’s rules.
The SEC has rejected applications by ProShares pair, which refer to five proposed ETFs from Direxion, also for listing on the New York Stock Exchange (NYSE) Arca. And two more from GraniteShares, for listing on the Chicago Board Options Exchange (CBOE).
The SEC’s statement
“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,” the SEC explains.
The SEC emphasises in all its rejection notices, which as various experts noted have the exact same wording, “that its disapproval does not rest on an evaluation of whether Bitcoin or blockchain technology more generally, has utility or value as an innovation or an investment”.
‘Among other things’
The SEC also states that, “among other things, the Exchange has offered no record evidence to demonstrate that Bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to Bitcoin is necessary.”
The Winklevoss Twins
A few weeks ago, the SEC rejected another Bitcoin ETF proposed by crypto entrepreneurs Cameron and Tyler Winklevoss.
Sometime after rejecting the Winklevoss twin’s proposal, one of the SEC’s commissioners, Hester Peirce, expressed his opposition to the regulatory body’s decision saying that the move to disapprove of Bitcoin ETFs is a disservice to investors and innovators alike.
The SEC fundamentally disagreed with the Winklevoss’ assertion that cryptocurrency markets are “uniquely resistant to manipulation”, saying that the SEC has no data or information “to support such a conclusion”.
All eyes on the SEC
In September, all crypto and blockchain eyes will be on the SEC as it deals with yet another Bitcoin ETF application. This had been expected in August, but the SEC decided to extend the deadline for a proposal submitted by investment firm VanEck and financial services company SolidX for trading on the CBOE.
The difference between this application and all others is that instead of a Bitcoin futures-based fund, they proposed a physically-backed model.