SEC to Review 9 Bitcoin ETF Rejections: ‘Decision Stays’ but Staff Actions Reexamined
In Surprise Move, the SEC Stays the Decision on 9 Bitcoin ETFs
The United States Securities and Exchange Commission denied the approval of 9 bitcoin ETFs on Wednesday. On Thursday, the agency made the surprise decision to stay the decision on those 9 bitcoin ETFs.
On Wednesday, the SEC denied bitcoin ETF approval requests from three separate funds. Those funds were seeking approval for 9 different bitcoin ETFs, including two ETFs from ProShares, two ETFs from GraniteShares, and five ETFs from Direxion. All 9 ETFs were built to hold bitcoin futures contracts. The statements denying each ETF were released early Wednesday evening.
At the time, the SEC stated that the ETFs were rejected because they felt bitcoin futures markets were not sufficiently large enough to prevent manipulation.
“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange 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 requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange's rules be designed to prevent fraudulent and manipulative acts and practices.”
Identical wording was seen in all three disapproval documents.
In a potential reversal of fortune, however, the SEC on Thursday announced plans to review those orders.
The SEC Is Temporarily Staying the Decision to Deny the 9 Bitcoin ETFs
The ETF denial documents had originally been drafted by staff members on behalf of agency leadership. The commission, led by Chairman Jay Clayton, periodically reviews the actions of its staff.
While the denial documents are under review, the SEC is taking the time to review the decisions. It appears that executive members of the Commission will now review the decision made by staff to determine whether or not the denials are final.
SEC Commissioner Hester Peirce tweeted the news earlier today, saying the denial actions “are stayed pending Commission review.”
In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff's action, as will now happen here.
— Hester Peirce (@HesterPeirce) August 23, 2018
“the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff's action, as will now happen here.”
Peirce, as you may remember, was the lone dissenter in the SEC’s decision to deny the bitcoin ETF proposed by the Winklevoss twins earlier this summer. Peirce disagreed with her employer’s decision to deny the ETF.
Peirce posted a copy of the letter sent by the SEC to NYSE explaining that the Commission will review the ETF denials. NYSE Arca was one of the regulated exchanges where the proposed bitcoin ETFs would have been traded.
Does This Mean Bitcoin ETF Approval is Forthcoming?
The markets didn’t really react to the denial of 9 bitcoin ETFs yesterday. With other bitcoin ETF denials, we’ve seen markets surge in the leadup to the announcement, only to drop shortly after the denial. With these latest denials, we didn’t see either a surge or a drop: markets stayed relatively flat. That tells us few people expected the bitcoin ETFs to be approved. We also had a piece on why Bitconnect of all names were mentioned inside the SEC statements.
Earlier today, the SEC stayed the decision denying the 9 bitcoin ETFs. That means the SEC plans to temporarily review the denial of all 9 bitcoin ETFs.
Some are assuming this means the SEC will reverse the decision and approve the 9 bitcoin ETFs. That’s certainly possible.
Others claim that this is unlikely to occur, and that the SEC is simply doing its due diligence on one of its most high-profile decisions of the year.
In any case, bitcoin markets have stayed mostly flat on the news as they have throughout this week. Stay tuned to see if this SEC Bitcoin Exchange Traded Fund reversal goes anywhere – it’s unclear when the SEC will make a final decision on the 9 ETFs.