The United States Securities and Exchange Commission (SEC) has issued three published decisions, covering nine different Bitcoin ETF. Applications put forward by Direxion, Pro Shares, and Granite Shares were rejected along largely the same lines of argument.
Bitcoin ETFs Denied in Three Published Decisions
The heavily footnoted rejection document runs some 24 pages, but the heart of the matter very well could be tucked away on page 22, under the heading “Protecting Investors and the Public Interest”. In its analysis section, the SEC notes, “The Commission acknowledges that, compared to trading in unregulated bitcoin spot markets, trading a bitcoin-based ETF on a national securities exchange may provide some additional protection to investors,” a concern many bitcoin mainstreaming enthusiasts point out as reason enough to join regulated exchanges.
Evidently the SEC doesn’t see it that way. As the denial details further, “the Commission must disapprove a proposed rule change filed by a national securities exchange if it does not find that the proposed rule change is consistent with the applicable requirements of the Exchange Act—including the requirement under Section 6(b)(5) that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices.”
More Clarity, But a Surprise to Some
That order shot down all five proposals by Direxion. The heavy work out of the way, the SEC basically used the same arguments in Release no. 34-83904; file no. SR-NYSEArca-2017-139, also of August 22, 2018. Similarly titled, “Order Disapproving a Proposed Rule Change to List and Trade the Shares of the Pro Shares Bitcoin ETF and the Pro Shares Short Bitcoin ETF,” it dashes eager hopefuls immediately.
In even more heavily footnoted pages and a longer publication of 26 pages, the agency nearly word for word reprints the above rationale, concluding a paragraph later, “Thus, even if a proposed rule change would provide certain benefits to investors and the markets, the proposed rule change may still fail to meet other requirements under the Exchange Act. For the reasons discussed above, the Exchange has not met its burden of demonstrating an adequate basis in the record for the Commission to find that the proposal is consistent with Exchange Act Section 6(b)(5), and, accordingly, the Commission must disapprove the proposal,” ending Pro Shares current bid.
Lastly, Granite Shares fell victim to the same reasoning as the other two companies above in the SEC’s “Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF,” it titled its denial.
For Bitcoin ETF proponents this an obvious setback, one perhaps they were not expecting (though a decision was rumored by this Thursday). A positive takeaway for future litigation with the agency is the extent it took to deny these ETF tries. There is a lot of information yet to be digested by concerned parties. A careful reading, the right configuration, and perhaps a new day can be had. For now, the SEC is not budging.
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