SEC Approves Applications to Allow the Listing and Trading of Spot Bitcoin ETPs

The SEC approved the listing and trading of spot bitcoin exchange-traded product ("ETP") shares "on an accelerated basis."

In the Order, the SEC found the amended proposals to be "consistent with the Exchange Act rules and regulations thereunder applicable to a National Securities exchange."

The decision to approve the applications came in the wake of a District of Columbia Circuit Court of Appeals decision in August which found that the SEC's disapproval was "arbitrary and capricious" and that the SEC failed to adequately explain its reasoning when it turned down the previously proposed bitcoin ETP proposals (see previous coverage).

SEC Commissioner Statements

Chair Gary Gensler said that the decision to approve fillings that were previously disapproved was based on a change in circumstances and the U.S. Court of Appeals decision. He described the limited reach of the SEC's approval action, stating: "Today's Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission's willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission's views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws." He further stated that "while we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin."

Commissioner Hester M. Peirce questioned what actually changed over the long period of disapprovals, and described the damage done by the SEC's "unwillingness to let spot bitcoin ETPs into US markets." Decrying the Commission's obstruction over the years, she "celebrated the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs" as well as "the perseverance of market participants in trying to bring to market a product they think investors want."

Commissioner Caroline A. Crenshaw dissented from the SEC's decision, arguing that the SEC approval "actions are unsound and ahistorical. And worse, they put us on a wayward path that could further sacrifice investor protection. I cannot agree that these actions serve either our statutory or foundational investor protection mandate." Among many concerns raised, Commissioner Crenshaw stated that "these products will flood the markets and land squarely in the retirement accounts of U.S. households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets and will impact the ETPs."

Commissioner Mark T. Uyeda, while supporting the majority, raised concerns that the Order (i) "improperly attempts to validate the application of the 'significant size' test to spot bitcoin ETPs that was struck down by judicial review;" (ii) "invents a novel, previously unarticulated standard to form the basis for approval"; and (iii) "disguises the Commission's motivation for accelerating the approval of the applications, which is to prevent a first-mover advantage among spot bitcoin ETPs."