The SEC Division of Trading and Markets rejected applications for nine exchange-traded funds ("ETFs") tied to bitcoin futures markets from three separate companies – ProShares, Direxion, and GraniteShares – on the grounds that they lacked adequate means of preventing "fraudulent and manipulative acts and practices." In each case, the rejections were subsequently stayed pending review by the SEC Commissioners.
The SEC affirmed its position that bitcoin futures markets necessitate stringent market manipulation and fraud prevention procedures since they are reliant upon a single exchange to determine the value of the bitcoin ETF. According to the SEC, the companies stated in their applications that they would use the Chicago Board Options Exchange ("CBOE") and Chicago Mercantile Exchange ("CME") futures market to establish the value of their ETFs. However, the SEC determined that the CBOE and CME bitcoin futures markets are not "markets of significant size." Furthermore, the SEC did not agree that the companies' existing surveillance procedures and capacity to share surveillance information with U.S. futures exchanges were sufficient to prevent market manipulation and fraud.