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SEC pushes spot Bitcoin ETF decision to 2024
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(Kitco News) - It looks as though the first spot Bitcoin (BTC) exchange-traded fund (ETF) won’t launch until 2024 at the earliest as the Securities and Exchange Commission (SEC) has announced a delay in its ruling on the ARK 21Shares Bitcoin ETF application until January.
According to a notice filed by the regulator on Tuesday, as outlined in the Securities Exchange Act of 1934, the Commission is required to issue an order approving or disapproving a proposed rule change no later than 180 days after the state of filing.
They have the option to “extend the period for issuing an order approving or disapproving the rule change by not more than 60 days if the Commission determines that a longer period is appropriate and publishes reasons for such a determination.”
Since the latest proposed rule change on the ARK 21Shares application was done on May 15, the SEC had until November 11 to rule on the application. “The Commission is extending the time period for approving or disapproving the proposed rule change for an additional 60 days,” the filing said.
“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” the SEC said. “Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act, designates January 10, 2024, as the date by which the Commission shall either approve or disapprove the proposed rule change.”
The SEC also delayed its decision on the Global X Bitcoin Trust application.
One positive takeaway from this development is that Jan. 10 is 240 days after the initial ARK 21Shares application was filed, which means that the SEC will not be able to delay its decision beyond that date. The fact that they announced the delay well in advance of the November 11 deadline was an indication to crypto proponents that a spot Bitcoin ETF won’t be approved in 2023.
Global X was one of the more recent applications as it was only filed in August, becoming the ninth spot-Bitcoin ETF application to be filed this year. The SEC has until November 21 to make a ruling on Global X or extend its deadline further. If approved, the fund would grant investors "exposure to Bitcoin with important protections that are not always available to investors that invest directly in Bitcoin," the filing said.
The delay comes as the federal government prepares for a potential shutdown brought about by a budget impasse in Congress.
Prior to the announcement of the delays, a group of four U.S. Representatives sent a letter to SEC Chair Gary Gensler calling for him to “immediately” approve a spot Bitcoin ETF, citing the recent decision in the Grayscale case.
“We write to ensure the SEC does not continue to discriminate against spot Bitcoin ETPs,” the letter said. “The SEC is responsible for making certain that products that comply with investor protection standards are made available to investors. This position was affirmed 3-0 by the U.S. Court of Appeals for the District of Columbia last month in Grayscale Invs., LLC v. SEC. The Circuit Court upheld Grayscale’s position that the SEC violated the Administrative Procedures Act when it denied Grayscale’s application to convert Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETP.”
Based on that decision, which held that “Grayscale’s proposed Bitcoin ETP is ‘materially similar, across relevant regulatory factors, to the approved Bitcoin futures ETPs,’” the Representatives said, “A spot Bitcoin ETP is indistinguishable from a Bitcoin futures ETP. Thus, the SEC’s current posture is untenable moving forward.”
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They noted that Gensler has “consistently stated that digital asset firms should ‘come in and register’ with the SEC” during his time at the agency, and said market participants have followed up on these statements by filing applications for a regulated spot Bitcoin ETP.
“Following the Court of Appeals’ decision, there is no reason to deny such applications under inconsistent and discriminatory standards,” they said. “A regulated spot Bitcoin ETP would provide increased protection for investors by making access to Bitcoin safer and more transparent. Congress has a duty to ensure the SEC approves investment products that meet the requirements set out by Congress. To that end, we urge you to approve the listing of spot Bitcoin ETPs immediately.”
Bloomberg Intelligence ETF analyst James Seyffart responded to Tuesday’s decision to delay with surprise, saying “The SEC just came out SUPER early and delayed the ARK Invest / 21Shares Bitcoin ETF filing. This thing wasn't due for a decision until Nov 11. Also delaying the [Global X] application which was due Oct 7.”
“This may put the hammer down for any hopes of an ETF approval this year,” Seyffart added. “If they went on Ark/21 shares already, we may see delays on all the other filings too. My base case is that we will get the ‘delays’ on the other filings sometime this week and the SEC is simply getting ahead of a likely federal government shutdown. I have no idea what this means for the Grayscale/GBTC situation. SEC has to petition for an en banc hearing by 10/13.”
In response to a question about his previous predictions that a spot BTC ETF had a 75% chance of approval in 2023, Seyffart said, “Likely going down on the back of this. BUT the main catalyst for 2023 has *always* been what happens next with the GBTC court case though. If that can be put off till 2024 the odds go way lower. If not – our odds aren't impacted drastically by this.”
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