US SEC Rejects Yet Another Bitcoin Spot ETF Application

• The SEC has turned down Ark 21Shares Spot Bitcoin ETF application.
• Again the SEC says the application fails to ensure consumer protection and prevent market manipulation.
• The decision on Grayscale’s application is expected in July.

Once again, the US SEC has turned down a Bitcoin spot ETF. Ark 21Shares, a partnership between renowned investor Cathie Wood’s Ark Investments and 21Shares, is on the receiving end of the SEC’s latest rejection.

The Nays Have It Once Again

The crypto industry in the US has been pushing for a Bitcoin spot ETF for a long time now to create a familiar onboarding experience for institutions interested in the crypto market. However, time and time again, the SEC has continued to turn down spot ETF applications.

The Gary Gensler-led SEC, this time, turns down the application of Ark 21Shares to offer a Bitcoin-backed ETF listed and traded under the Chicago Board of Options Exchange (Cboe, BZX Exchange). Again, the reasons given by the SEC for rejecting the application remain the same. 

The SEC’s report read, “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 requirements of Exchange Act Section 6(b)(5), and in particular, 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.’”

Ark 21Shares had initially filed their application to the SEC in June of last year. The SEC in August published the application for public comments. However, the SEC continued to delay its decision on whether or not to approve the application, with the most recent delay coming on the 25th of January.

While the crypto community continues to wait for a Bitcoin spot ETF, the SEC has approved several ETFs based on Bitcoin Futures. SEC chair Gary Gensler himself has let slip that he prefers the futures-backed product to a spot ETF. The SEC this year has turned down 3 Bitcoin spot ETF applications now, with Fidelity and Skybridge Capital disappointed in January.

What Does The Future Hold For Spot Bitcoin ETFs?

Currently, the applications of Grayscale and Bitwise for a spot ETF are being considered by the SEC. Decisions on the ETFs proposed last October are expected in July. In February, the SEC opened the door for public comments on the applications.

Less than a week ago, Grayscale CEO Michael Sonnenshein while speaking with Bloomberg, revealed that the company was pooling all available resources to ensure it secured approval from the SEC. However, Sonnenshein also hinted that if their application was rejected, Grayscale was not opposed to seeking redress in court.

Meanwhile, in a Bloomberg Intelligence report last week, analysts James Seyffart and Eric Balchunas disclosed that they see bitcoin-backed ETFs gaining approvals in 2023. The duo based their prediction on an expected SEC rule change that would allow Crypto exchanges to be compliant.