SEC Commissioner Hester Peirce to Interview with Ran NeuNer on Bitcoin ETF Rejection

SEC Commissioner Hester Peirce Dissents with the SEC’s Bitcoin ETF Rejection

Hester Peirce made headlines across the bitcoin community last week when she publicly dissented the decision of the Securities and Exchange Commission (SEC). Peirce dissented from the commission’s opinion that the market wasn’t ready for a bitcoin ETF.

Peirce’s full statement can be found at here.

“I respectfully dissent from the Commission’s order disapproving a proposed rule change, as amended, to list and trade shares of the Winklevoss Bitcoin Trust on Bats BZX Exchange, Inc,” wrote Peirce in her statement.

In Peirce’s lengthy explanation, she described how, in her opinion, the ETF application meets the requirements outlined by the SEC. She sees no reason to reject the bitcoin ETF.

Essentially, Commissioner Peirce’s argument boils down to the fact that approval of the bitcoin ETF would solve many of the industry’s biggest problems. Greater institutional participation in bitcoin markets would solve many of the problems experienced in the bitcoin industry – including market manipulation and fraud.

In fact, Peirce argues that by rejecting the bitcoin ETF, the Securities and Exchange Commission is doing greater damage to the investors it’s supposed to protect.

“In addition, I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.”

Peirce concluded by stating that the rejection of the bitcoin ETF suggests that “innovation unwelcome in our markets.” By rejecting the bitcoin ETF, Peirce argues, the SEC is declaring that other innovative investment products are not welcome in the United States.

Why Does Peirce Believe a Bitcoin ETF Should Be Approved?

Peirce provides a lengthy explanation of her decision to dissent. Generally speaking, Peirce feels that the SEC has misinterpreted its own rules – or misinterpreted bitcoin markets – when rejecting the ETF.

Some of the specific issues include:

The Proposed Rule Change Satisfies the Requirements of Exchange Act Section 6(b)

The SEC disapproved BZX’s proposed rule change because it found the proposed rule inconsistent with section 6(b) of the act. This part of the requires 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.

Peirce claims the rules of the BZX exchange – the exchange on which the bitcoin ETF was to be listed – satisfy the conditions outlined in section 6(b):

“Because the disapproval order focuses on the bitcoin spot market, it does not give adequate weight to the important function that exchanges, as self-regulatory organizations (“SROs”), perform under our regulatory framework. BZX should, and would, play a central role in monitoring trading in shares of the Trust.”

As the main listing platform for bitcoin ETFs, BZX would be forced to act as an SRO because it’s in their best interest.

The Disapproval Order Inhibits Institutionalization

Peirce also takes issue with the fact that the disapproval of the bitcoin ETF inhibits institutionalization, a process that would have greatly beneficial effects on bitcoin markets

“In disapproving the proposed listing, the Commission points to problems in the bitcoin market that I believe would be mitigated by institutionalizing the market—a phenomenon that bitcoin ETPs would foster.”

Peirce claims institutionalization would solve problems like price disparity across bitcoin markets. It would also encourage exchanges to bolster their security, encourage greater investment in custody solutions, and reduce market manipulation.

Peirce sees it as a catch-22 situation: the SEC will only approve a bitcoin ETF when the bitcoin spot and derivatives markets have matured substantially, yet the best way for these markets to mature is to institutionalize them.

“The disapproval order therefore unintentionally undermines investor protection. It precludes investors from accessing bitcoin through an exchange-listed avenue that offers predictability, transparency, and ease of entry and exit. Investors who want to diversify their portfolios by adding a bitcoin component will be relegated to the spot market, which will not benefit from the increased institutional discipline that approval of this product would bring.”

The Disapproval Order Dampens Innovation

Finally, Peirce takes issue with the SEC stifling innovation. By rejecting the bitcoin ETF, the SEC is declaring that innovative investment products are not welcome – even if they try their best to meet the rules.

Regulators should not be “gatekeepers of innovation”:

“By withholding approval of a bitcoin-based ETP because the underlying market insufficiently resembles the markets for other commodities, we set ourselves up as the gatekeepers of innovation. Securities regulators are ill-equipped to fill this particular role.”


Ultimately, the SEC rejected the latest bitcoin ETF application. However, the SEC still has multiple ETF approvals waiting to be approved or denied. It seems unlikely that a bitcoin ETF would be accepted immediately after the last one was rejected. However, it seems inevitable that we’ll have a bitcoin ETF at some point in the future – especially if Commissioner Hester Peirce continues to be an influential voice among her colleagues.

SEC Commissioner Hester, dubbed Crypto Mom, has seen a sharp rise in popularity among the crypto community seeing a spike of 13,000 new followers after her dissent. We are all eager to see what he next moves will be. We will all have to stay tuned on Wednesday as Ran NeuNer scored an exclusive interview with the SEC Commissioner.

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