SEC Rejects 9 Bitcoin ETF Applications from ProShares, Direxion; GraniteShares

Bitcoin ETFs Application

The US Securities and Exchange Commission yesterday rejected as expected nine more applications for a publicly traded Bitcoin ETF from three different companies. Probably because of the low expectations, there was no big reaction from the Bitcoin price, which moved sideways after yesterday’s BitMEX pump.

The Securities and Exchanges Commission (SEC) has rejected two Bitcoin ETF proposals from ProShares and five Direxion ETFs, all of which were listed on the New York Stock Exchange (NYSE) Arca, as well as two proposals from GraniteShares for listing on the CBOE. This is clear from three separate statements issued by the SEC last night.

Direxion requested approval for Bitcoin ETFs in collaboration with the NYSE, which would have traded no physical bitcoin but would have been tied to the price of bitcoin and would have allowed long or short leveraged positions.

The GraniteShares ETFs, on the other hand, traded the Bitcoin future products available on the Chicago derivatives exchanges CBOE and CME. The ProShares Funds do not intend to hold Bitcoin Futures contracts to maturity but to roll them.

The rejection of all applications comes as no surprise since most analysts have already assumed in advance and consider a Bitcoin ETF approval in 2019 realistic.

Probably also because of this, the SEC’s decision, unlike the previous weeks where the Winklevoss  ETF as rejected and the VanEck ETF was postponed to September 30th, 2018, did not lead the news to an immediate downtrend. Instead, the Bitcoin price is back sideways, just above the $6,400 mark, following BitMEX downtime’s inorganic yesterday rise and price correction pulled over the day.

Similar to the rejection of the Winklevoss Bitcoin ETF, the SEC once again expressed its concern that the underlying market is vulnerable to fraud and manipulation. Remarkably, the SEC used exactly the same reasoning and wording in all its rejections:

“… the Commission rejects this proposed rule change, as  the Exchange has failed to meet its obligations under the Stock Exchange Act and the Commission’s rules of procedure to demonstrate that its proposal complies with the requirements of the section on the stock exchange sector 6 (b) ( 5), in particular the requirement that the rules of a national stock exchange are designed to prevent fraudulent and manipulative acts and practices. “

Remarkable in the reasoning for their rejection of the GraniteShares is that the SEC cites a letter from the CBOE and speaks of a too low trading volume of CBOE and CME futures:

“In addition, CFE President and COO have recently confirmed in a letter to the Commission staff that the current Bitcoin futures trading volumes on the CBOE Futures Exchange and CME may not be sufficient to support ETFs that are long or short Aim for 100 [percent] to bitcoin. “

In the case of ProShares’ two ETFs, the SEC stated: “The stock market has, inter alia, provided no evidence that Bitcoin futures markets are markets of significant size. This failure is crucial because the stock market has not created any other means of preventing fraudulent and manipulative action.

” In all cases, the SEC emphasized that the rejection “is not based on an assessment of whether Bitcoin or the blockchain technology has any common use or value as an innovation or an investment.”

However, the most anticipated Bitcoin ETF among a variety of filings with the Securities and Exchange Commission (SEC) remains the motion filed by VanEck and SolidX Bitcoin ETF in collaboration with the CBOE, whose decision was recently postponed to 30.09.2018. The decision on this could be a landmark event for the Crypto market.


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