SEC rejects second Bitcoin spot ETF proposal citing key requirements were not met

• The US SEC has denied another spot-based Bitcoin ETF application.
• WisdomTree’s Bitcoin ETF has witnessed several delays from the regulator and was finally rejected.
• The agency has yet to allow a Bitcoin ETF based on the spot market to move forward.

The United States Securities & Exchange Commission (SEC) has disapproved another spot-based Bitcoin exchange-traded fund (ETF). The regulator rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of the Bitcoin Trust from WisdomTree.

WisdomTree spot Bitcoin ETF denied

The SEC has rejected the second Bitcoin spot ETF, citing the lack of surveillance sharing agreements and the inability to prevent fraudulent or manipulative practices in the BTC spot market.

WisdomTree has already witnessed several delays in the regulator’s decision on its spot Bitcoin ETF in 2021. The company first filed its application with the SEC on March 26 this year. In April, the regulator opened the application to the public for comments and assigned longer periods of time to make a decision on the proposed rule change. 

The SEC dismissed a proposed rule change from the Cboe BZX Exchange to trade shares of the firm’s Bitcoin Trust and stated that any rule change in favor of approving the ETF would disallow the protection of investors and the public interest.

The securities regulator further stated that the BZX had not met its burden under the Exchange Act and the Commission’s Rules of Practice. The SEC explained that the proposed Bitcoin ETF would not allow the agency to detect or obtain information necessary to investigate fraud and market manipulation.

The agency further claimed that BZX did not provide sufficient information to clarify on how the cryptocurrency market is resistant to manipulation or address concerns on potential sources of fraud, manipulation, wash trading and other risk factors. 

VanEck’s Bitcoin ETF was rejected by the SEC for similar reasons in November. While there is demand for cryptocurrency ETFs among digital asset investors, the regulator has rejected a number of BTC ETF applications.

Although the regulator is reluctant to approve spot-based crypto ETFs, the agency has already approved ETFs tied to Bitcoin futures contracts since October. SEC Chairman Gary Gensler has publicly reiterated support for futures-based Bitcoin ETFs in the past few months. 

 

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