Surprise, surprise: SEC rejects more crypto ETF proposals
Three companies’ proposals to operate cryptocurrency exchange-traded funds (ETFs) have been rejected by the U.S. Securities and Exchange Commission (SEC), in the wake of their junking of the Winklevoss twins’ application in July.
In separate orders replying to companies ProShares, Direxion and GraniteShares, the commission stated that its decision “does not rest on an evaluation of whether Bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.” Rather, the rejection had to do with concerns of insufficient measures taken “to prevent fraudulent and manipulative acts and practices.”
The proposals sought the creation of an assortment of ETFs, whose performance depends on the rise or fall of BTC. Unlike with the proposal of Cameron and Tyler Winklevoss, the three companies also wanted to tie their funds with the movement of BTC futures contracts on the Chicago Mercantile Exchange and CBOE Futures Exchange, whose prices vary on expectations of price movements of the cryptocurrency at certain dates.
The SEC expressed its concern that such ETFs, if approved, would be susceptible to price manipulations. “The Exchange [NYSE Arca] must demonstrate that it has in place a surveillance-sharing agreement with a regulated market of significant size related to bitcoin, because ‘such agreements provide a necessary deterrent to manipulation because they facilitate the availability of information needed to fully investigate a manipulation if it were to occur’,” the SEC said, quoting itself from the Winklevoss order.
Although the NYSE had stated that not more than 10% of net assets of the ETF would be for futures contracts not monitored by an entity with a comprehensive surveillance-sharing agreement, “this does not function as a meaningful limitation where, as here, there is no minimum amount of a Fund that must be invested in such contracts.”
The Wall Street Journal reported that ProShares and GraniteShares representatives would not comment on the latest orders, while a Direxion representative had not provided a response.
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