SEC denies VanEck Bitcoin spot ETF for a third time; commissioners dissent

The US Securities and Exchange Commission (SEC) has again rejected VanEck’s Bitcoin spot ETF proposal. Filed March 10.

SEC Rejects VanEck Bitcoin ETF

Related filings show that the SEC has rejected a rule change designed to allow Cboe BZX Exchange to list VanEck’s exchange-traded fund (ETF).

The SEC rejected the proposal less than a year after it was proposed on June 24, 2022.

The central issue, according to the SEC, is that ETF providers have failed to demonstrate that they can prevent market manipulation. Specifically, these providers do not indicate that they have surveillance sharing agreements with a sizeable market.

The SEC also rejected competing proposals from other companies, including Wisdomtree, ARK Invest and Valkyrie Investments, for substantially the same reasons.

Commissioner’s objection

The SEC’s reasoning has been applied repeatedly, but two SEC Commissioners⁠— Hester Peirce and Mark Uyeda⁠— criticized the decision of the regulator today.

They noted that it has been six years since the SEC rejected the original application for Bitcoin’s spot exchange-traded fund or exchange-traded product (ETP).

The SEC claims it will apply the same rules to other ETP proposals, but Peirce and Ueda say the Bitcoin spot ETP rules are actually “very onerous.”

Specifically, they argue that the SEC’s rules for determining “significant” markets generally apply to specific trading venues rather than to markets as a whole. They also say the SEC applies a two-part test. First, whether market manipulators need to trade in the relevant market for their surveillance measures to be effective; whether or not Relevant market price. These standards only apply to crypto products, they say.

Peirce has previously voiced criticism of her agency’s stance, so her recent objections may not affect future decisions about approving the ETF.

Elsewhere, Grayscale’s decision to contest the proposed ETF conversion in court with the SEC could help the company gain approval, depending on the outcome.