SEC Approves Listing and Trading of Spot Bitcoin Exchange-Traded Products (ETPs) Following Legal Developments

Bits Logics Team . 11th Jan 2024

• U.S. SEC has granted approval for the listing and trading of several spot bitcoin exchange-traded product (ETP) shares.
• The SEC head clarified, “Today’s action will include certain protections for investors.” 
• Gensler also highlighted ongoing SEC efforts to review registration statements for 10 spot bitcoin ETPs simultaneously.

In a significant move reflecting evolving legal interpretations, the U.S. Securities and Exchange Commission (SEC) has granted approval for the listing and trading of several spot bitcoin exchange-traded product (ETP) shares. This decision marks a departure from previous disapprovals, prompted by changing circumstances and a legal mandate.

The SEC had previously rejected over 20 exchange rule filings for spot bitcoin ETPs from 2018 to March 2023, including a proposal by Grayscale for the conversion of the Grayscale Bitcoin Trust into an ETP. 

However, a key turning point came with a ruling by the U.S. Court of Appeals for the District of Columbia, which found the Commission’s reasoning for disapproving Grayscale’s proposed ETP inadequate. The court vacated the Grayscale Order and remanded the matter to the Commission.

Gary Gensler, SEC Chair, explained the shift in approach, stating, “Circumstances, however, have changed. 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.”

The Commission emphasized its merit-neutral stance, evaluating rule filings based on adherence to the Exchange Act and relevant regulations. The approval is limited to ETPs holding one non-security commodity, bitcoin, and does not indicate a broader acceptance of crypto asset securities.

Gensler clarified, “Today’s action will include certain protections for investors,” outlining that sponsors of bitcoin ETPs must provide transparent disclosure about the products. While acknowledging the required disclosures, he emphasized that the approval does not endorse specific ETP arrangements, such as custody.

The approved ETPs will be listed and traded on registered national securities exchanges, subject to rules designed to prevent fraud and manipulation. Gensler also highlighted ongoing SEC efforts to review registration statements for 10 spot bitcoin ETPs simultaneously, aiming to create a level playing field and promote fairness and competition.

Investors are cautioned that the SEC’s approval does not extend to crypto trading platforms or intermediaries, most of which remain non-compliant with federal securities laws