SEC Rejects Ark’s And 21Shares’ Spot Bitcoin ETF For The Second Time

Key Points:

• Once again, the US SEC declined to offer Ark Investment Management and exchange-traded note provider 21Shares permission to market a spot Bitcoin ETF.
• The Cboe BZX Exchange was accused by the commission of failing to show that its plan is compliant with the criteria pertaining to the avoidance of fraud and other nefarious activities.

A spot Bitcoin exchange-traded fund (ETF) proposed by Ark Investment Management and 21Shares was denied approval by the Securities and Exchange Commission (SEC).

With this judgment, the commission has now rejected Ark and 21Shares’ requests twice in an effort to launch the Cboe BZX Exchange. The companies’ original request to create a Bitcoin ETF was turned down by the SEC in April.

The Cboe BZX Exchange, where the ETF would be listed, was accused by the SEC of failing to “demonstrate that its proposal is consistent with the requirements” pertaining to the avoidance of fraud and other nefarious activities.

“This order disapproves the proposed rule change. The Commission concludes that BZX 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 Exchange Act Section,” the SEC said in a statement.

It came to the conclusion that BZX had not proven that it had a thorough surveillance-sharing arrangement with a regulated market of magnitude relative to spot bitcoin, adding that:

“BZX repeats various assertions made in prior bitcoin-based ETP proposals, including in the Previous ARK Filing, that the Commission has previously addressed and rejected, including in the prior ARK 21Shares Order – and more importantly, BZX does not respond to many of the Commission’s reasons for rejecting those assertions.”

The SEC has not yet approved any proposal for a Bitcoin ETF, citing uncertainty in the underlying Bitcoin market and worries about potential price manipulation for years.

The affiliate of the Digital Currency Group that administers the Grayscale Bitcoin Trust investment fund, one of the companies whose petition was denied, Grayscale, sued the SEC last year over the agency’s denial of its own spot ETF application. The lawsuit is still pending.

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Harold

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