Winklevoss Twins’ ETF Plans Thwarted a Second Time by the SEC
The SEC has disapproved for a second time the application by Bats BZX Exchange to list Winklevoss Bitcoin Trust ETFs on its exchange. In a blow to the twin Gemini exchange founders’ ambitions, the regulator’s rejection cites the potential for fraud and manipulation in the largely unregulated crypto market for its decision. The dampening announcement comes on the eve of the expiry of CME Group BTC futures contracts.
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Watchdog Not Too Shy to Deny the Winklevii
Bats BZX Exchange, Inc. first submitted a proposed rule change to the U.S. Securities and Exchange Commission two years ago. The rule change would have opened the door for the exchange to list Winklevoss Bitcoin Trust ETFs.
The application was rejected early last year. A petition appealing the rejection was then filed soon after. The SEC’s ruling yesterday to deny the brothers again was based heavily on concerns over fraud and manipulation, with most bitcoin and cryptocurrency trading occurring outside the U.S. in largely unregulated markets. Per the SEC:
“The Commission is disapproving BZX’s proposed rule change because it finds the proposed rule inconsistent with Section 6(b)(5) of the Act, which requires, in part, 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.”
The application argued that the underlying bitcoin market was “generally … less susceptible to manipulation than the equity, fixed income, and commodity futures markets”. The regulator disagreed, finding that argument to be “unpersuasive” amid concerns that cryptocurrencies have yet to mature as investment vehicles.
Interestingly, this announcement comes only a day before CME Group BTC futures contracts expire on July 27th. Conspiracy theorists internet wide suspect foul play, especially given that the decision relates to a two-year-old application and a year-old rejection.
The Door Remains Ajar
In a 3-1 vote, the regulator doubled down on its March 2017 decision, but did not rule out the possibility of approving a bitcoin or cryptocurrency-backed ETF in the future. Dissenting voter, Commissioner Hester M. Peirce, felt that the inclusion of institutional investors in the market would allay many of the fears the SEC has over cryptocurrencies. Peirce suggested that in rejecting the application, the commission was undermining the same investor protections it is charged with upholding:
“More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.”
The SEC currently has five other applicants seeking bitcoin or crypto ETF approval, including applications from VanEck and SolidX Partners Inc. as well as investment firm Direxion.
Have your say. Winklevoss twin backed or otherwise, are bitcoin ETFs inevitable? What do you make of the timing being so close to the expiry date of the CME Group’s BTC futures contracts?
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