Kryptoin’s Spot Bitcoin ETF Is Next in Line for Rejection Before Christmas, After SEC Declines WisdomTree’s ETF
The US Securities and Exchange Commission (SEC) denied WisdomTree’s application for a spot Bitcoin exchange-traded fund (ETF) this week.
“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 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,” said the agency in a letter on Wednesday.
The rejection comes seven months after the SEC first started evaluating WisdomTree’s Bitcoin Trust application, filed with the Cboe BZX exchange in March. The watchdog delayed the decision on it twice, first in June and then in July.
If approved, the Trust would have allowed retail and institutional investors to invest in a regulated financial product covering Bitcoin without investing in crypto directly.
The rejection, however, wasn’t unexpected as SEC Chair Gary Gensler has repeatedly shown a preference for a Bitcoin futures ETF, which began trading in the US in October over those physically-backed.
Last month, the SEC also rejected investment firm VanEck’s proposal for a spot Bitcoin ETF. The next in line is Kryptoin's application which is also “likely to be denied” just before Christmas.
Earlier this week, the largest digital asset manager, Grayscale, which has filed to convert its bitcoin trust (GBTC) to an ETF, sent a letter to the agency arguing that SEC’s repeated rejections are “arbitrary and capricious” since it has approved futures-based ETFs.
Additionally, this could violate the Administrative Procedure Act (APA), which covers the decision-making process of federal agencies, it said.
“The number of plaintiffs with standing to sue the SEC for an APA violation just increased by one,” commented Jake Chervinsky, Head of Policy at Blockchain Association.