Bitcoin ETF: SEC Issues Three Orders Rejecting Nine Proposals

The United States Securities and Exchange Commission (SEC) has rejected a total of nine Bitcoin ETF proposals. The decision, while unsurprising, will undoubtedly come as another blow to proponents who argue that the market is ripe for a BTC ETF. The SEC has so far decided against approving any Bitcoin ETF filing.

Details of the Rejections

On Wednesday (August 22, 2018), the Commission published three separate orders expressing its decision to reject the Bitcoin ETF proposals of Proshares, Direxion, and GraniteShares. Particularly noteworthy is the fact that the decision came before the deadline for any of the filings.

In rejecting all three filings [which amount to nine proposals], the SEC used the same verbiage, showing that perhaps in the Commission’s eyes, all the filings had similar problems. A portion of the Proshares rejection order reads:

“This order disapproves the proposed rule change. Although the Commission is disapproving this proposed rule change, the Commission emphasizes 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. Rather, 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.”

Suggested Reading : Learn more about Bitcoin in our beginner’s guide.

Issues with Bitcoin ETFs

As with its other Bitcoin ETF decisions, the SEC also provided reasons for the rejections. In the order rejecting the Direxion filing, the SEC quotes a recent letter written by the CBOE, saying:

“The current bitcoin futures trading volumes on Cboe Futures Exchange and CME may not currently be sufficient to support ETPs seeking 100% long or short exposure to bitcoin.”

According to the Commission, this statement supports its belief that the CBOE and CME Bitcoin futures markets aren’t of significant size. The order also references recent comments from the chairman of the U.S. Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo, in which he characterized the BTC futures market as “small”. The same issues were also raised in the Proshares rejection order.

Unlike other SEC BTC ETF decisions, the market didn’t react immediately to the news of the rejection.