SEC Says Spot Bitcoin ETF Filings Are Inadequate

The Securities and Exchange Commission said a recent wave of applications filed by asset managers to launch spot bitcoin exchange-traded funds are inadequate, according to people familiar with the matter. 

The agency informed exchanges Nasdaq and Cboe Global Markets, which filed the applications on behalf of asset managers including BlackRock and Fidelity Investments, that the filings aren’t sufficiently clear and comprehensive, the people said. 

Prices of bitcoin and other crypto-related stocks have surged since mid-June when BlackRock filed paperwork with the SEC for an ETF that holds actual bitcoin. The cryptocurrency has climbed about 20%, rising above $30,000 for the first time since April. Shares of Coinbase Global, which is listed as the custodian for the BlackRock fund’s holdings, have soared more than 30% over the same period. 

A wave of traditional and crypto asset managers followed in BlackRock’s footsteps. Fidelity Investments, Cathie Wood’s Ark Investment Management, Invesco, WisdomTree, Bitwise Asset Management and Valkyrie all reactivated or amended their applications for a spot bitcoin ETF in recent days.

An ETF that tracks the actual price of bitcoin would mark a watershed moment for the industry because it would provide wider access to the cryptocurrency. It would allow investors to buy and sell bitcoin through a brokerage account as easily as shares of stock.

The SEC has repeatedly rejected such funds going back to 2017 on the grounds that they are vulnerable to fraud and market manipulation. At least half a dozen ETFs that own bitcoin futures are already on the market.

Investors and analysts viewed the bid by the world’s largest money manager as the best hope yet for a spot bitcoin ETF, partly because of its near-perfect record seeing applications through.

Some industry watchers predicted that BlackRock’s filing would appease the SEC’s concerns through an agreement to share “surveillance” of a spot bitcoin-trading platform with Nasdaq, which would list the ETF. 

Yet the SEC told the exchanges that it returned the filings because they didn’t name the spot bitcoin exchange with which they are expected to have a “surveillance-sharing agreement” or provide enough information about the details of those surveillance arrangements. Asset managers can update the language and refile. 

A Cboe spokeswoman said it plans to update and refile. Nasdaq and the SEC declined to comment. 

Representatives for BlackRock, Fidelity, Invesco, WisdomTree and Ark Investment Management declined to comment. Representatives for Bitwise and Valkyrie didn’t respond to requests for comment.