The SEC's long-delayed ruling comes as no surprise, as Chairman Gary Gensler has been fairly clear that he opposes spot Bitcoin ETFs, which would issue shares tracking the value of Bitcoin.
ETFs hold a basket of underlying assets, such as commodities, bonds, or a collection of securities — like the stocks that make up the S&P 500. A spot Bitcoin ETF would hold the cryptocurrency itself, while a futures-based Bitcoin ETF holds a basket of BTC futures contracts rather than tokens.
"For context, $BITO's volume puts it in the Top 2% of all ETFs. About what $MDY [the SPDR S&P Midcap 400 ETF Trust] traded."
The Rules Apply
The application was technically a request for a rules change by the Cboe BZX Exchange that would allow it to list and trade shares of VanEck Bitcoin Trust.
Specifically, it sought to bypass the need for a "comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets," the SEC said. To do this, BZX would have to demonstrate "that the bitcoin market as a whole or the relevant underlying bitcoin market is uniquely and inherently resistant to fraud and manipulation."
Stating that it not agree that was the case, the SEC pointed to seven "possible sources of fraud and manipulation in the bitcoin spot market generally" that it had cited in turning down previous Bitcoin ETF applications:
Persons with a dominant position in Bitcoin manipulating Bitcoin pricing
Hacking of the Bitcoin network and trading platforms
Malicious control of the Bitcoin network
Trading based on material, non-public information, including the dissemination of false and misleading information
Manipulative activity involving the purported "stablecoin" Tether (USDT)
Fraud and manipulation at Bitcoin trading platforms