Winklevoss Bitcoin ETF Proposal Rejected By SEC

News, Regulation | July 27, 2018 By:

The US Securities and Exchange Commission (SEC) has once again rejected the application for a bitcoin exchange-traded fund (ETF) by Cameron and Tyler Winklevoss.

In 2017, the SEC turned down a rule change request from the Bats BZX Exchange that would’ve allowed it to list and trade shares of the Winklevoss Bitcoin Trust. Following the disapproval, Bats submitted a petition to review that decision. On Thursday, however, the petition was curbed in a 3-1 vote. The SEC said it found that neither the filing nor its related rules change met the requirements of the Exchange Act and the agency’s existing guidelines.

“BZX 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 its rules be designed to prevent fraudulent and manipulative acts and practices,” the SEC said.

In its proposal, BZX argues that “geographically diverse and continuous nature of bitcoin trading makes it difficult and prohibitively costly to manipulate the price of bitcoin.” The regulator, however, said that BZX has not demonstrated that bitcoin and bitcoin markets are inherently resistant to manipulation.

“The Commission subjects the proposal to the analysis it has historically used to analyze commodity-trust ETPs, focusing particularly on whether there are comprehensive surveillance-sharing agreements with significant, regulated markets,” the SEC said. “Because adequate surveillance-sharing agreements are not in place — and any current surveillance-sharing agreements are with bitcoin-related markets that are either not significant, not regulated, or both— the Commission concludes that the proposal is inconsistent with Exchange Act Section.”

The SEC emphasized that the rejection of the petition does not rest on an evaluation of whether bitcoin or blockchain technology has value as an innovation or investment.

“Although the Commission is disapproving this proposed rule change, the Commission 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,” the SEC said.

At present, the SEC has yet to approve a crypto-based ETF. Several additional proposals are still waiting on the regulator’s review, including joint proposal from VanEck and SolidX. Direxion Investments has also submitted five crypto EFT proposals, but the SEC postponed its review on these filings until September 21.