As you probably read on our site, one of the breaking news stories lately was the one where the US Securities and Exchange Commission (SEC) rejected all of the pending and derivative-backed Bitcoin exchange-traded funds (ETFs) which were filed by ProShares and Direxion.
As Jake Chervinsky, who is a government enforcement defense & securities litigation attorney for Kobre Kim LLP says, the SEC rejected all of the seven ETFs because of the risk of market manipulation and the fraud involved.
The SEC had a clear stance that the Bitcoin futures markets – unlike the CBOE and CME markets – are not sufficiently large markets to be properly regulated or have exchange-traded funds to base their value on.
As Chervinsky said:
“So why did the SEC reject all these ETFs? Basically, the decision came down to the risk of market manipulation & fraud. The SEC can only approve an ETF that is ‘designed to prevent fraudulent and manipulative acts and practices.’ In the SEC’s view, these ETFs were not.”
Chervinsky also noted that the SEC was not satisfied with the efforts of the two institutions to rely on the futures markets – mostly because that they are aware that the majority of Bitcoin trading still occurs in unregulated markets and exchanges. As he stated:
“The SEC wasn’t impressed, finding that the bitcoin futures markets aren’t “of significant size” as required by the Winklevoss denial. They even cited Crypto Twitter favorite Chris Giancarlo, CFTC Chairman, who characterized the volume of the futures markets as ‘quite small.’ As a result, the SEC found that CBOE & CME wouldn’t provide enough info about the ‘identity of market participants’ on unregulated spot and derivative markets ‘where a substantial majority of trading’ occurs.”
Currently, it is clear that the SEC will not approve any futures market-backed ETFs in the US market – just like the previous denial of the Winklevoss Bitcoin ETFs.
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