TheCorporateCounsel.net

Yesterday afternoon, the Commission approved a series of rule changes that will allow for the listing and trading of the 11 bitcoin ETFs that were the subject of applications by national securities exchanges — specifically, NYSE Arca, Nasdaq, and Cboe BZX Exchange. Chair Gensler’s supporting statement reminds us of the history here:

We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed. The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP (the Grayscale Order). The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares.

His statement also included words of warning and a reminder of the limited nature of this approval.

While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto […]

Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws. As I’ve said in the past, and without prejudging any one crypto asset, the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws.

As usual, the SEC was divided, but, given the topic and Chair Gensler’s support, not in the usual way. Commissioner Crenshaw dissented, arguing that the Commission’s earlier decision to treat two registered bitcoin futures ETPs differently than the “spot” or “physical” bitcoin ETPs at issue here was reasonable. The WSJ reported that Commissioner Lizarraga also voted against the order.

Commissioner Uyeda supported while taking issue with the underlying analytical approach of the order, which he argued “effectively amounts to merit regulation.” Commissioner Peirce supported and largely used her statement to say ‘better late than never’ (not a quote!) and also briefly took issue with the order’s requirement not imposed on prior commodity-based ETPs, citing Uyeda’s statement for a full discussion.

– Meredith Ervine