As we have discussed previously, although there was hope when Gary Gensler was initially appointed Chairman of the Securities Exchange Commission that this would mean the SEC would take a different, more enlightened view on the issue of approving a spot Bitcoin ETFs, over the past couple of months, that hope was dashed when Chairman Gensler noted that he looked favorably only on futures-based Bitcoin ETFs.  Consistent therewith, on October 19, 2021, Pro Shares became the first to launch a futures-based Bitcoin ETF, which rose more than 4% on its first day of trading.  Valkyrie followed three days later with its own futures-based Bitcoin ETF.

On Friday, November 12, 2021, the other shoe dropped.  The SEC, as expected, rejected the application of VanEck to launch a spot Bitcoin ETF (one that aimed to own the cryptocurrency directly).  The decision came on day 238 of the 240 days that the SEC has to make its decision.  The SEC has been rejecting such applications since the first one was filed in 2013 on the basis that the Bitcoin market was subject to manipulation.  That reasoning remained at the heart of the recent decision:

It is essential for an exchange listing a derivative securities product to enter into a surveillance-sharing agreement with markets trading the underlying assets for the listing exchange to have the ability to obtain 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.

The SEC said that this standard was not met.  The SEC also wrote:

Listing exchanges have also attempted to demonstrate that other means besides surveillance-sharing agreements will be sufficient to prevent fraudulent and manipulative acts and practices, including that the bitcoin market as a whole or the relevant underlying bitcoin market is “uniquely” and “inherently” resistant to fraud and manipulation.  In response, the Commission has agreed that, if a listing exchange could establish that the underlying market inherently possesses a unique resistance to manipulation beyond the protections that are utilized by traditional commodity or securities markets, it would not necessarily need to enter into a surveillance-sharing agreement with a regulated significant market. Such resistance to fraud and manipulation, however, must be novel and beyond those protections that exist in traditional commodity markets or equity markets for which the Commission has long required surveillance sharing agreements in the context of listing derivative securities products. No listing exchange has satisfied its burden to make such demonstration.

Since Chairman Gensler’s appointment, numerous applications were submitted for ETFs that would own the Bitcoin directly.  It now seems unlikely that any will be approved in the near future.


David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. David has been included in Chambers for his expertise in international arbitration. He is the editor of the firm's blockchain blog.