SEC concluded that Cboe BZX has not established that it has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to listing Ark 21Shares Bitcoin ETF.
The United States Securities and Exchange Commission (SEC) has rejected a bid from Cboe Global Markets Inc to list a Bitcoin ETF jointly issued by Ark Investment Management and 21Shares for the second time. According to the SEC, Cboe Exchange has not yet demonstrated the required balance to protect investors from fraudulent activity including price manipulation.
Since the FTX fallout, which has been described as the fastest big corporate failure in American history, the SEC has significantly increased its guard on approving anything related to cryptos.
“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 6(b)(5), which requires, in relevant part, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest,” the SEC argued.
SEC on Cboe’s Bid to List Ark 21Shares Bitcoin ETF
According to the SEC filings, Cboe BZX Exchange proposed to list Ark 21Shares Bitcoin ETF on May 13, 2022. On June 1, 2022, the SEC published the proposal for comments. However, the SEC has noted that Cboe has not met several requirements needed to protect traders from fraudulent activity despite the latter’s argument that Bitcoin is resistant to such manipulative behaviour.
As a result, the SEC concluded that BZX has not established that it has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to listing Ark 21Shares Bitcoin ETF.
4. In a statement that echoed previous decisions, the Securities and Exchange Commission stated that BZX has not met its burden under the Exchange Act. https://t.co/1uAl9rjQD9
— BecauseBitcoin.com (@BecauseBitcoin) January 26, 2023
As such, Cathie Wood’s Ark Invest and 21Shares will have to go back once again to the drawing board to see if the SEC will approve its Bitcoin ETF. Otherwise, Cathie Wood may follow a similar legal path taken by Grayscale.
Notably, the SEC previously rejected a bid by DCG’s Grayscale bid to introduce a Bitcoin ETF. As a result, Grayscale filed a legal complaint against the SEC, which is still a matter in court.
Nonetheless, the SEC may not back down on its decision following rampant rug pulls in the crypto market.
Side Notes
The SEC has not yet approved any Bitcoin ETF despite pressure from neighboring countries like Canada and institutional investors. Notably, high demand from institutional investors to get crypto exposure has fueled the need for a secure and regulated channel, which has been identified as EFTs.
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