The Cboe BZX Exchange argued for approval using the precedents established by CME’s crypto futures products, but the SEC rejected them.
After deferring a decision several times this year, the SEC has officially disapproved asset manager WisdomTree’s spot Bitcoin (BTC) exchange-traded fund (ETF).
The SEC denied a requested rule change from the Cboe BZX Exchange to list and trade shares in WisdomTree’s Bitcoin Trust, according to a Wednesday filing. The SEC stated that any rule change in favour of the ETF approval would not be “designed to prevent fraudulent and manipulative acts and practices,” nor would it “protect investors and the public interest.”
The SEC determined that BZX had failed to meet the requirements for listing a financial product under its rules in addition to the Exchange Act, claiming that the proposed BTC ETF would prevent the commission from “obtaining information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.”
Furthermore, the SEC claimed that the exchange lacked adequate safeguards “to prevent fraudulent and manipulative acts and practices” in any potential listing.
The agency said that BZX failed to present sufficient evidence to determine that the crypto market is resistant to manipulation or to address concerns about potential sources of fraud and manipulation, such as wash trading and other risk factors. While the exchange used the SEC’s rejection of crypto futures products as justification for admitting a spot crypto ETF, the SEC rejected them as evidence for accepting a spot crypto ETF.
“The Commission cannot conclude, based on BZX’s statements alone and absent any evidence or analysis in support of BZX’s assertions, that it is unlikely that trading in the ETP would be the predominant influence on prices in the CME bitcoin futures market,” said the filing.
Since filing its application with the Securities and Exchange Commission on March 26, WisdomTree has had the commission postpone a decision on its spot Bitcoin ETF several times in 2021.
In April, the SEC invited public comment on the application, then in May, July, and September, the SEC set lengthier deadlines for approving or disapproving the proposed rule change. Its reason for rejecting WisdomTree’s offering was similar to its reason for rejecting VanEck’s Bitcoin ETF in November.
WisdomTree, on the other hand, was able to list its crypto basket exchange-traded product on Euronext’s Paris and Amsterdam exchanges. The MEGA investment product is backed by physical crypto assets such as BTC and Ether and trades under the ticker MEGA (ETH).
A separate ETF application for WisdomTree’s Ethereum Trust in the United States, which was submitted to the Securities and Exchange Commission in May, is still being reviewed by the SEC. In addition, the agency is anticipated to make a decision on an exchange-traded fund that would provide exposure to Bitcoin through Kryptocoin, with a deadline of December 24.
