WisdomTree has become the latest investment firm whose application for listing a Bitcoin exchange-traded fund (ETF) was rejected by the US Securities and Exchange Commission (SEC).
SEC Rejects ETF Again
Multiple firms have appealed to the SEC to allow listing Bitcoin ETFs in the current market. However, the commission had always maintained a rigid stance towards these requests. So far, the regulator has only approved the Proshares BTC ETF, among multiple other pending applications. The Proshares approval gave the impetus to many other firms to amp up their applications, causing a wave of approval requests for spot-based Bitcoin ETFs. However, these requests have either been left pending or were rejected. The latest to join the reject pile is the proposal for a BTC spot ETF from WisdomTree Investments.
Lack Of Preventative Measures: SEC
Explaining their motive behind the rejection, the SEC cited a lack of surveillance sharing agreements to lead to fraudulent or manipulative market practices. The rejection order stated,
"The Commission concludes that BZX 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 Exchange Act Section 6(b)(5), in particular, the requirement that the rules of a national securities exchange be 'designed to prevent fraudulent and manipulative acts and practices’ and 'to protect investors and the public interest’.”
SEC Prefers Futures Over Spot ETFs
The previous Bitcoin ETF to get rejected was presented by VanEck back in March 2021. The grounds for rejection were similar. The SEC stated that not enough precautionary measures were taken to prevent fraudulent activities and protect customer interests. It is quite apparent now that the SEC is not looking too favorably at spot ETFs that can directly track BTC and instead is more comfortable with futures-based ETFs, like the Proshares BTC Fund. However, investors believe that futures-based ETFs are not as profitable as spot ETFs.
Jake Chervinsky, head of policy for industry lobbyist The Blockchain Association, pointed out that the spot ETF sponsors will soon grow tired of the SEC’s stonewalling and rejection. He said,
“I wonder how long before one of the spot bitcoin ETF sponsors gets sick of arguing with a brick wall & decides to sue the SEC for an APA violation. I get why nobody did this before, but the case is stronger now with futures ETFs live, and the incentive to play nice is much weaker.”
On the other hand, other countries are moving ahead of the US in the crypto ETF race. For example, Canada recently approved its first spot Bitcoin ETF proposal from Fidelity Investments. Additionally, the country even has an Eth product.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.