The SEC denied financial services company WisdomTree’s application for an exchange-traded fund, saying in a letter that it did not meet criteria “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”
An ETF is an investment tool that allows investors to buy shares that represent the underlying asset. A Bitcoin ETF would allow investors to gain exposure to Bitcoin without having to buy the cryptocurrency from an exchange and storing it in a crypto wallet (something many investors still consider overly complicated.)
There is demand for a Bitcoin ETF among cryptocurrency investors, but the SEC has rejected a number of Bitcoin ETF applications.
Under Chairman Gary Gensler, the SEC has, however, allowed Bitcoin futures ETFs to begin trading. These products enable investors to buy shares linked to contracts that bet on the future price of Bitcoin. The futures market is also already regulated by the CFTC, unlike the spot market, which may help to explain why the SEC under Gensler has allowed Bitcoin futures ETFs to move forward.
Bitcoin futures ETFs were initially met with enthusiasm from the market: ProShares’ Bitcoin Strategy ETF traded nearly $1 billion in shares on its debut when it started trading on the New York Stock Exchange in October. Competitors who have since launched very similar products haven’t fared nearly as well, however.
WisdomTree, a New York-based ETF sponsor and asset manager, has also applied to the SEC for an Ethereum ETF, which would track the second largest cryptocurrency by market cap.
There is a long list of high-profile companies waiting for a response from the SEC for their crypto ETF applications, but the odds remain stacked against them: the SEC has rejected every application so far.