SEC rejects WisdomTree's application for a spot Bitcoin ETF... again

Published at: Oct. 11, 2022

The United States Securities and Exchange Commission, or SEC, has disapproved of a rule change which would allow exchange-traded fund provider WisdomTree to list and trade shares of a Bitcoin ETF.

According to an Oct. 11 filing, the SEC rejected a proposed rule change which would have allowed WisdomTree to list and trade shares of its Bitcoin BTC Trust on the Cboe BZX Exchange after several delays due to extensions and comment periods. WisdomTree first filed the spot Bitcoin ETF application on Jan. 25 with publication in the federal register on Feb. 14.

The SEC said any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.” Will Peck, WisdomTree’s head of digital assets, told Cointelegraph in a September interview that the SEC’s market manipulation claims would likely be “the hardest nut to crack” in an ETF approval.

Peck said at the time that WisdomTree was “kind of watching this and seeing what’s going to happen” but did not plan to take Grayscale’s approach in filing a lawsuit with the SEC over the rejection of its Bitcoin ETF. He added the company planned to “engage more productively” with the U.S. regulator, positing the SEC would “ultimately get there” in approving a spot crypto investment vehicle.

Similar to its December 2021 rejection of a WisdomTree spot Bitcoin ETF offering, the SEC concluded that the BZX exchange did not have the ability “to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.” In addition, the financial regulator said BZX had been unable to provide data demonstrating ”that wash trading and other possible sources of fraud and manipulation in the broader Bitcoin spot market will be ignored by market participants.”

“BZX has not met its burden of demonstrating an adequate basis in the record for the Commission to find that the proposal is consistent with Exchange Act Section 6(b)(5),225 and, accordingly, the Commission must disapprove the proposal,” said the filing.

To date, the SEC has not approved a single spot crypto ETF application in the United States, despite criticism from many lawmakers, regulators, and industry leaders. However, the regulator began approving ETFs linked to Bitcoin futures starting in 2021, giving the green light to companies including ProShares and Valkyrie.

Cointelegraph reached out to WisdomTree, but did not receive a response at the time of publication.