In now a second denial for Cameron and Tyler Winklevoss, the U.S. Securities and Exchange Commission (SEC) rejected their application for establishing a bitcoin ETF. In a three to one ruling, the commission cited the potential for market manipulation and a lack liquidity in denying their bid.
The proposal for the BATS BZX Exchange would have allowed the exchange to list and trade Winklevoss Bitcoin Trust’s commodity-based shares. Citing investor protection, the majority for the SEC ruling disagreed with the Winklevoss’ position that bitcoin markets, including their own Gemini Exchange, are “uniquely resistant to manipulation,” specifically stating “that the record before the Commission does not support such a conclusion.” They took issue with three fourths of the volume of bitcoin being generated from outside the United States and that ninety five percent of this volume occured on non-U.S. exchanges.
Concerning the ruling, Cameron Winklevoss stated: “Despite today’s ruling, we look forward to continuing to work with the SEC and remain deeply committed to bringing a regulated bitcoin ETF to market and building the future of money”
In her dissent, Commissioner Hester M. Peirce believes that proposal satisfies the statutory standard needed to permit them to trade their bitcoin-based exchange traded product and views the ruling as undermining for investor protection.
“I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the Bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the Bitcoin market that underlie its disapproval order. More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of Bitcoin ETPs.”
In addition to this filing, the Chicago Board Options Exchange (CBOE) in partnership with VanEck and SolidX filed a joint application for a bitcoin ETF which was published for comments on July 2. Dodd Frank rules stipulate that action must result 45 days after publication of the proposal, meaning a determination must be made by August 16.