On August 22, the Securities and Exchange Commission (“SEC”) issued three separate orders rejecting multiple applications which would have allowed the listing and trading of Bitcoin exchange-traded funds (“ETFs”). Two of the orders involved NYSE Arca, Inc., an exchange headquartered in Chicago. NYSE Arca submitted proposed rule changes which would allow it to list shares on behalf of two Proshares ETFs and five Direxion ETFs. The third order involved a proposed rule change by the Chicago Board Options Exchange (“CBOE”) to allow the CBOE to list shares on behalf of two GraniteShares ETFs.
In all three orders, the SEC said that “the Commission is disapproving this proposed rule change because, as discussed below, the Exchange 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 the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.” Overall, the SEC’s concerns were broad, encompassing both the lack of controls and oversight by the exchanges, as well as a failure to demonstrate that bitcoin futures markets are significant enough to resist price manipulation.
Notably, all three orders made sure to signal that the SEC was not passing judgment on cryptocurrency or blockchain technology, stating clearly that “[the SEC] emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.”