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Vedder Thinking | Articles SEC Approves Exchange Listings for Spot Bitcoin ETPs

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On January 10, 2024, SEC Chair Gary Gensler announced that the SEC had approved the listing and trading of a number of spot Bitcoin exchange-traded products (ETPs). The announcement follows an August 29, 2023 decision by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) in favor of Grayscale Investments in its case challenging the SEC’s disapproval of its filing to convert its existing, privately offered Bitcoin investment trust to a spot Bitcoin ETP that would be listed for trading on a national securities exchange. Noting that the approved filings were similar to those the SEC had disapproved in the past, including more than 20 filings for spot Bitcoin ETPs since 2018, Chair Gensler tacitly acknowledged the D.C. Circuit’s decision by stating that, as circumstances have changed, the approval of these filings is the “most sustainable path forward.”

In general, the SEC’s prior disapprovals of spot Bitcoin ETP filings were based on its finding that the relevant securities exchange was unable to establish that it had a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin that could be reasonably expected to assist in detecting and deterring fraudulent and manipulative acts and practices in the spot Bitcoin markets. Although past filings to list spot Bitcoin ETPs have argued that a comprehensive surveillance-sharing agreement with the Chicago Mercantile Exchange (CME) Bitcoin futures market would satisfy this standard, the SEC had declined to find that the CME Bitcoin futures market is a market of significant size related to spot Bitcoin. The SEC separately allowed the first Bitcoin futures ETPs to list for trading on an exchange in October 2021.

The D.C. Circuit rejected the SEC’s attempted distinction between the spot and futures markets for Bitcoin in determining whether market manipulation existed in the underlying spot market. The D.C. Circuit found that the evidence for correlation between the two markets was overwhelming and thus the SEC’s attempts to distinguish between the two was arbitrary and capricious. Accordingly, in contrast to its response to previous filings, the SEC ultimately concluded with respect to the approved filings that fraud or manipulation that impacts prices in spot Bitcoin markets would likely similarly impact Bitcoin futures prices and that the relevant securities exchanges’ comprehensive surveillance-sharing agreement with the CME Bitcoin futures market could therefore be reasonably expected to assist in detecting and deterring fraudulent and manipulative acts and practices in the spot Bitcoin markets. The SEC specifically cited in its approval order the high level of correlation between the Bitcoin futures market and spot Bitcoin in recent years that the D.C. Circuit relied upon to rule against the SEC.

Chair Gensler emphasized in his statement that the SEC’s approval is limited to ETPs holding Bitcoin and does not signal the SEC’s willingness to approve listings of crypto asset securities or otherwise indicate the SEC’s views with respect to other crypto asset-related matters. Contrasting Bitcoin ETPs to other commodity ETPs, Chair Gensler stated that Bitcoin is primarily a speculative, volatile asset also used for illicit activity and that the SEC does not approve or endorse Bitcoin.

Chair Gensler’s statement is available here, and the SEC’s approval order is available here.



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