SEC Rejects 9 Bitcoin ETF Applications from ProShares, Direxion and GraniteShares

The U.S. Securities and Exchange Commission (SEC) has rejected a total of nine applications to list and trade various Bitcoin (BTC) exchange-traded funds (ETFs) from three different applicants, according to a three separate orders published by the SEC today, August 22.

The disapprovals come one day ahead of the anticipated deadline, August 23, stipulated for a pair of BTC ETFs that had been submitted by ProShares in conjunction with the New York Stock Exchange (NYSE) ETF exchange NYSE Arca.

The SEC has now rejected a further seven proposed ETFs alongside the ProShares pair –– these being five further proposed ETFs from Direxion, also for listing on NYSE Arca –– and two proposals from GraniteShares, for listing on CBOE.

For all three disapprovals, the SEC has stated that:

The SEC has today reinforced its qualms over inadequate “resistance to price manipulation” in an insufficiently sized BTC derivatives market. In the case of ProShares’ two ETFs –– and repeated in the two other disapproval orders –– the SEC has stated that:

As a March 2018 registration statement from the SEC noted, “the [ProShares] Funds do not intend to hold Bitcoin Futures Contracts through expiration, but instead intend to either close or ‘roll’ their respective positions.” This had been specifically designated as a potential risk for the two ETFs in question –– in addition to the “extreme volatility and low liquidity” attributed to both Bitcoin spot and derivatives markets.

In today’s three orders, the SEC has however notably stated that:

The SEC’s fresh disapprovals echo the concerns the agency had already articulated in its initial rejection of a high-profile Bitcoin ETF application from the Winklevoss twins in March 2017:

This July the SEC rejected the Winklevoss’ petition following their initial application’s denial, in which the twins claim that crypto markets are “uniquely resistant to manipulation.” In their rejection of the petition, the agency said that “the record before the Commission does not support such a conclusion.”

At the beginning of August, the SEC delayed its decision over yet another Bitcoin ETF application –– this time filed by by investment firm VanEck and financial services company SolidX, for trading on CBOE. Notably, instead of proposing a Bitcoin futures-based fund, the application proposed a physically-backed model, which will raise the further question of custody.

Bitcoin is currently trading around $6,380, down about 2.2 percent on the day to press time.