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(Kitco News) - The Cboe BZX Exchange officially amended its 19b-4 filing for the proposed ARK 21Shares Bitcoin ETF on Wednesday, bringing the filing more in line with the recent filing from BlackRock in an attempt to secure its approval.
New changes to the application include a surveillance sharing agreement (SSA) with the Chicago Mercantile Exchange (CME) futures markets and a crypto exchange, which will most likely be Coinbase, according to Bloomberg ETF analyst Eric Balchunas, who noted that the amendments “put [CBOE] in pole position to be approved first bc they filed first.”
21Shares and Cathie Wood’s ARK Investment Management re-submitted the application for a spot Bitcoin ETF in April after it had previously been rejected by the Securities and Exchange Commission on two separate occasions. The amendments were done as an added step in attempting to have the application approved on the third attempt.
The SEC rejected the previous applications on the grounds that they did not meet the rules of practice and Exchange Act requirements for listing a financial product.
Since the application by ARK was filed in April, its review will come before the review of BlackRock’s application, meaning it could become the first spot BTC ETF approved in the U.S.
“21Shares, ARK and Cboe [Chicago Board Options Exchange] are first in line because their next SEC decision date is Aug. 13, 2023, and we don’t yet have a date for the other 19b-4 applications like the one from BlackRock,” Bloomberg Intelligence ETF analyst James Seyffart said in a recent interview.
The list of firms that have made spot Bitcoin ETF filings over the past two weeks includes BlackRock, ARK, Fidelity, WisdomTree, Invesco and Valkyrie Funds.
Balchunas said that he sees a 50% chance that a spot BTC ETF will be approved, partially due to the ongoing case between Grayscale and the SEC that revolves around the SEC’s rejection of Grayscale's application to convert its flagship spot Grayscale Bitcoin Trust (GBTC) to an ETF.
“Our senior legal analyst [Elliott Stein] gives Grayscale a 70% chance of winning [the] case against SEC, who could approve BlackRock's ETF as [a] way to save face using trusted 'adult' TradFi [companies] and stick it to Grayscale,” Balchunas said.
Balchunas also highlighted one potential roadblock for some of the filers in the form of an exclusivity agreement between Coinbase and BlackRock.
“Would BlackRock (who doesn't play) even allow Coinbase to enter into an SSE agreement with another that would help another issuer beat them to market?” Bachunas questioned. “If so ARK would need another crypto exchange to use.”
With only a few large exchanges with ample liquidity approved to provide services in the U.S., any limits on who Coinbase can partner with on SSAs could limit the ability of other firms to launch a spot BTC ETF. Data from The Block shows that Coinbase controls a roughly 40% share of the volume for spot exchanges that support USD.
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| Invesco, WisdomTree and Bitwise re-file Bitcoin ETF filings after BlackRock's move |
And there is also an issue with how the SEC views Coinbase, according to Seyffart.
“Coinbase does not meet the SEC's definition of a regulated market,” Seyffart said. “And if [the SEC] wants to deny the application, they can definitely do it on those grounds. Coinbase may be a publicly listed US company regulated by the SEC but their spot bitcoin markets are not a regulated market.”
Seyffart also issued a warning to those assuming that the BlackRock ETF application would be approved because of the inclusion of an SSA. “We haven't seen the Surveillance Sharing Agreements (SSAs). It's entirely plausible that the SEC could also deny based on what is actually written in those SSAs if it doesn't like the terms or amount of data being shared.”
“This isn't the first time there has been a Surveillance sharing agreement in an ETF application,” he added. “The Winklevoss twins tried this using an SSA with their own exchange Gemini. But the SEC still denied [it] because it wasn't a market of significant size, nor is it *regulated*.”
Only time will tell how the spot Bitcoin ETF events will unfold, but for the majority of crypto proponents, including Gemini co-founder Cameron Winklevoss, the filing by BlackRock is seen as an opportunity to scoop up low-priced Bitcoin ahead of a significant price increase.
The Great Accumulation of bitcoin has begun. Anyone watching the flurry of ETF filings understands the window to purchase pre-IPO bitcoin before ETFs go live and open the floodgates is closing fast. If bitcoin was the most obvious and best investment of the previous decade, this…
— Cameron Winklevoss (@cameron) June 21, 2023
