The US Securities and Exchange Commission (SEC) has again rejected a plan to list a spot bitcoin exchange-traded fund (ETF), prompting a suit from one of the world’s biggest digital asset managers.
Grayscale sought to list the ETF on Intercontinental Exchange’s NYSE Arca exchange.
The asset manager said it had filed a petition for review with the US Court of Appeals for the District of Columbia Circuit to challenging the SEC decision to deny conversion of Grayscale Bitcoin Trust to a spot bitcoin ETF.
The SEC has rejected more than a dozen proposals for spot bitcoin ETFs over the past year, with much of its focus on the lack of any “surveillance-sharing agreements with a regulated market of significant size relating to the underlying assets”.
Although the regulator acknowledged that surveillance-sharing agreements are not the exclusive means by which a listing exchange of a commodity-trust exchange-traded product (ETP) can meet its obligations, the SEC has historically recognised their importance.
“When considering whether NYSE Arca’s proposal to list and trade the shares is designed to prevent fraudulent and manipulative acts and practices, the commission applies the same analytical framework used in its orders considering previous proposals to list bitcoin-based commodity trusts and bitcoin-based trust issued receipts,” the SEC wrote.
Proponents of spot bitcoin ETFs say they would offer low-cost and easily accessible investments in the world’s most widely traded cryptocurrency.
The approval was expected in the light of several bitcoin futures-based ETFs that kicked off last year. Grayscale has expressed dismay that bitcoin futures ETFs are permitted but regulators denied approval to an ETF based on the underlying investment.
The Grayscale denial follows the SEC’s rejection of Bitwise’s application for approval of a similar spot bitcoin ETF.
“The commission concludes that NYSE Arca has not met its burden to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), which requires [a design] to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest,” the SEC ruled.
The price of bitcoin, the largest digital currency, is down about 70% from its high of around $69,000 in November.
- George Russell, with Reuters