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The U.S. Securities and Exchange Commission (SEC) has decided to postpone its verdict on the various spot Bitcoin exchange-traded fund (ETF) applications submitted earlier this year. This delay, as indicated in agency filings on Thursday, pushes the decision timeframe to October. The applicants awaiting a decision include prominent names such as BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets.
After already experiencing a significant decline earlier in the day, Bitcoin (BTC) plunged even further upon receiving the news, resulting in a 4.1% decrease over the past 24 hours, bringing its price down to $26,100.
Last month, the SEC initiated the evaluation of the most recent batch of applications, encompassing a spectrum of applicants ranging from cryptocurrency-focused entities to conventional financial institutions such as Wise Origin (Fidelity), BlackRock, and Invesco Galaxy. These applicants are aspiring to introduce the inaugural spot Bitcoin ETF, a development that proponents believe could facilitate increased participation from retail investors in the Bitcoin market, all the while sparing them from the complexities associated with establishing a digital wallet or acquiring Bitcoin directly.
Today's orders indicate that the SEC is postponing any definitive decisions and, instead, opting to extend the current comment periods while encouraging increased public input regarding the submitted applications. The revised deadlines for Wise Origin, Galaxy, and WisdomTree have been set for October 17, with Valkyrie having a two-day extension to October 19. Bitwise's new deadline is now October 16.
The regulatory body has a maximum of 240 days, starting from the commencement of its application review process, to render a definitive verdict of approval or denial. Historically, the SEC staff has habitually utilized the entire available comment and review period to postpone reaching final determinations until the full 240-day period has transpired, hence the anticipation of agency filings on Thursday.
Earlier this week, the D.C. Circuit Court of Appeals issued a ruling that deemed certain justifications provided by the regulatory authority for rejecting bitcoin ETF applications as "arbitrary and capricious." This decision came after Grayscale contended that the SEC lacked a solid foundation for denying its request to transform the Grayscale Bitcoin Trust into an ETF. It's worth noting that Grayscale and CoinDesk have a common parent company, Digital Currency Group.
In a unanimous decision authored by Judge Neomi Rao, the court determined that the SEC's rejection of the application lacked consistency in light of its prior approval of two bitcoin futures ETFs. The SEC's failure to provide a clear rationale for treating these product types differently was evident, especially considering the remarkable "99.9% correlation" between spot and futures market prices in the underlying bitcoin market. Grayscale's contention that its proposed ETF bore substantial resemblance to the futures-based ETFs ultimately prevailed.
"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," she said.
The SEC has employed analogous reasoning to deny various ETF proposals, just as it did when rejecting Grayscale's request. The appellate court has mandated the regulator to revisit the application for reconsideration.
