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The Securities and Exchange Commission rejected nine (yes, nine) different bitcoin-based exchange-traded products. But a top regulator has requested that the agency revisit their latest decisions.
On August 22nd, the SEC rejected three different bitcoin ETP applications proposed by the firms Direxion, ProShares, and GraniteShares. Nine different products were offered amongst the three firms. The rejections were issued separately for each proposal, but the commission’s concern about bitcoin’s immature exchange markets were cited in each of the three motions.
The agency wrote in the case of Direxion’s proposed exchange products, “…the Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular, the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
The SEC reiterated that “its disapproval does not rest on an evaluation of whether bitcoin or blockchain technology more generally, has utility or value as an innovation or an investment.”
The decision initially came as a disappointment to the crypto industry, but a surprise new update was announced one day after the rejections were published.
On August 23rd, the SEC published a letter stating that the commission will review the orders made the previous day.
“This letter is to notify you that, pursuant to Rule 43 I of the Commission’s Rules of Practice, 17 CFR 20 I .43 1, the Commission will review the delegated action. In accordance with Rule 431 (e), the August 22 order is stayed until the Commission orders otherwise.”
No timetable was announced for when a decision is expected.
SEC staffers issued the nine ETPs, but the head of the agency authorized the motion to review. Hester Pierce, one of the commissioners on that agency and a supporter for a regulated bitcoin product, cleared up the confusion on Twitter:
According to Rule 43-1 of the Commission’s Rules of Practice, only one commissioner needs to ask for a review of SEC staff decisions. After their review is complete, it would take a majority of the Commission to overturn the original decision.
It remains to be seen how this latest action will develop, but this validates the idea that crypto’s integration into the financial landscape is only getting closer.