The US Securities and Exchange Commission (SEC) has extended its evaluation of Bitcoin ETF applications from WisdomTree, Invesco Galaxy, and Valkyrie. The new decision deadlines are now slated for October.
WisdomTree's bid for a Bitcoin Trust approval, initially filed in December 2021, has encountered another delay. The firm resubmitted their ETF application in July 2023, with the first deadline just around the corner.
After an unsuccessful attempt in 2021, WisdomTree revised its approach as BlackRock entered the Bitcoin ETF race. This move to reapply was also embraced by other giants such as Valkyrie, Fidelity, and Invesco, all seeking approval for spot Bitcoin ETFs on their second try.
In a recent update, the SEC has chosen to postpone a decision on the spot Bitcoin ETF applications from WisdomTree and Invesco Galaxy. This decision coincides with the SEC's review of multiple Bitcoin ETF proposals, numbering over half a dozen.
Bitcoin (BTC) experienced a 4.1% decline in the past 24 hours, settling at $26,100 after an initial drop following the announcement. This downward trend followed a day of notable value fluctuations.
The SEC initiated the assessment of these applications, which come from both cryptocurrency-focused and traditional financial entities, including Wise Origin (Fidelity), BlackRock, and Invesco Galaxy, in the previous month. The aim of these applications is to introduce the inaugural spot Bitcoin ETF, a move seen as a gateway for increased retail participation in the Bitcoin sector and a way to simplify investment for newcomers.
In its most recent communication, the SEC has chosen to defer a final decision. Instead, it has chosen to prolong the existing comment periods and open the door for a more extensive public discussion surrounding these applications.
In a recent legal development, the D.C. Circuit Court of Appeals issued a ruling critiquing the SEC's reasons for rejecting Bitcoin ETF applications, labeling them "arbitrary and capricious." This decision was in response to Grayscale's argument that the SEC lacked a solid basis for denying the transformation of the Grayscale Bitcoin Trust into an ETF.
Judge Neomi Rao, authoring the court's unanimous statement, pointed out the inconsistency between the SEC's rejection and its approval of Bitcoin futures ETFs. The court noted a "99.9% correlation" between spot and futures Bitcoin market prices, which wasn't addressed in the SEC's differing treatment. The similarity between Grayscale's proposed ETF and futures ETFs played a significant role in the court's decision.
Judge Rao emphasized, "First, the underlying assets – bitcoin and bitcoin futures – are closely correlated. And second, the surveillance sharing agreements with the CME are identical and should have the same likelihood of detecting fraudulent or manipulative conduct in the market for bitcoin and bitcoin futures."
This echoes arguments made by the SEC in other rejections and prompted the appeals court to instruct the regulator to reconsider the application.
