The US Securities and Exchange Commission (SEC) has rejected nine Bitcoin Exchange Traded Fund (ETF) proposals from three different applicants. The SEC has rejected two proposals each from ProShares (NYSE Arca listing) and GraniteShares (CBOE listing), and five from Direxion (NYSE Arca listing). The disapprovals came via three separate orders published by SEC.
The SEC stated in its order:
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.13 Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are “markets of significant size.”
The SEC again reiterated its goal to protect investors from ‘fraudulent and manipulative practices’ since it is not a ‘significant market’. The Commission also made a lot of references to the Winklevoss order – the ETF application from the Winklevoss twins which was subsequently rejected earlier this year. More applications are in front of the SEC, including the famously delayed decision regarding a Bitcoin ETF proposed by VanEck.
Notably, though, the SEC also stated:
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.
As expected, the market has reacted negatively to the ETF rejections, losing around $12 bn in market cap within the last 24 hours. At the of writing, the cryptocurrency market capitalisation stood a little above $207 bn.
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