Cboe’s Third Attempt at Bitcoin ETF Approval: Will the SEC Finally Give In? Pros, Cons, and Conflict

Intricate courthouse scene, balanced scale with spot Bitcoin ETF on one side, Bitcoin futures ETF on the other, contrasting warm and cool tones, softly lit, SEC officials, Cboe and Grayscale representatives, intense expressions, underlying feeling of anticipation. No logos. 350 characters.

Cboe Global Markets has once again filed a proposal to list and trade shares of a spot Bitcoin exchange-traded fund (ETF); this marks their third attempt at gaining US regulatory approval. Operated by Cboe, the Cboe BZX Exchange formally submitted its filing with the Securities and Exchange Commission (SEC) on Tuesday to list and trade shares of the ARK 21Shares Bitcoin ETF. Notably, Cboe had tried twice before in May 2022 and August 2021 to list and trade the same ETF.

However, the SEC has consistently expressed concerns about fraud and manipulation, leading to denials for Cboe and rejections for other past proposals. Despite this, an ongoing battle persists as the SEC has yet to approve a spot Bitcoin ETF. Instead, the agency opted to approve several Bitcoin futures ETFs, allowing the trading of the ProShares Bitcoin Strategy ETF in October 2021.

The approval of a Bitcoin futures ETF but not a spot Bitcoin ETF has raised significant criticism amid a lawsuit brought against the SEC by crypto asset management company Grayscale. Grayscale has been working for years to convert its flagship Grayscale Bitcoin trust fund into a spot Bitcoin ETF. In their brief, they argued that the spot price of Bitcoin in both spot and futures ETFs is subject to the same risks, making it illogical to approve one product but not the other.

In March, the D.C. Circuit Court of Appeals heard oral arguments about this issue. Representing Grayscale, former U.S. Solicitor General Don Verrilli claimed in court that the SEC’s disapproval of Grayscale’s spot Bitcoin ETF contradicts previous orders.

Unsurprisingly, Cboe and Grayscale aren’t the only ones who’ve experienced denials from the SEC regarding Bitcoin ETF proposals. In fact, the agency has been rejecting dozens of other proposals for years, including one submitted by Cameron and Tyler Winklevoss in July 2016. Despite multiple attempts, their ambitious Winklevoss Bitcoin trust has yet to gain SEC approval, demonstrating the challenges faced by proponents of spot Bitcoin ETFs.

Although some may argue that the SEC’s repeated denial of spot Bitcoin ETF proposals is overly cautious, it is crucial to recognize that regulatory action must balance investor protection with market innovation. Achieving this balance, however, can be exceedingly difficult, especially when dealing with a relatively new and highly volatile asset like cryptocurrencies. For the time being, it remains to be seen how the regulatory landscape will evolve for spot Bitcoin ETFs and whether the SEC will eventually change its stance on approving them.

Source: Cryptonews

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