SEC says that the insufficient volumes of Bitcoin Futures don’t satisfy the agency’s rules to prevent fraud and manipulation.

The U.S. Securities and Exchange Commission (SEC) on Wednesday, August 22, has issued a rejection order to nine Bitcoin ETFs that were filed by Direxion, ProShares, and GraniteShares. The two ProShares Bitcoin ETFs and the five ETF proposals from Direxion were to be listed on NYSE Arca. The remaining two ETF proposals were from GraniteShares that were set to be listed on CBOE exchange.

The SEC decision comes just a day before its anticipated arrival on August 23. The SEC has issued a common reason for the rejection of all of the nine Bitcoin ETFs saying:

“…the Commission is disapproving this proposed rule change because, as discussed below, the Exchange 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 the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

However, SEC makes it clear that its decision of rejection should not be taken as a stand against cryptocurrencies or blockchain in general. The securities agency noted that it “emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.”

Last month in July, SEC had rejected the Bitcoin ETF proposal from Winklevoss twins stating that the proposal falls short of addressing and preventing issues of fraud and price manipulation in the digital currency market. However, this decision, to reject the Winklevoss proposal, by the agency was refuted by the SEC Commissioner Hester Pierce while providing strong arguments supporting her claims.

A unique thing about these nine Bitcoin ETF proposals is that they are all tied to the Bitcoin futures instead of directly holding the digital currency. While considering the low volumes that the Bitcoin futures have got in the past few months, the agency wrote:

“Surveillance-sharing with a regulated market of significant size related to bitcoin is necessary to satisfy the statutory requirement that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

The agency also cited a quote from the letter it received from CBOE. It reads:

“Additionally, the President and COO of CFE, recently acknowledged in a letter to the Commission staff that ‘the current bitcoin futures trading volumes on Cboe Futures Exchange and CME may not currently be sufficient to support ETPs seeking 100 [percent] long or short exposure to bitcoin’.”

This time the market reaction to the rejection is not showing signs of panic among investors, and there is no any major correction in the price of Bitcoin as well. Today’s near 4% correction in the Bitcoin price stands in line with the overall market sentiment. At the press time, Bitcoin is seen trading at $6450 with a market cap of $111 billion, according to the data from CoinMarketCap.

Everyone is now awaiting the SEC’s decision on the CBOE Bitcoin ETF which the agency has postponed to 30th September 2018. However, many experts have claimed that the agency could further leverage its position to extend this further, and the possibility of Bitcoin ETF arrival anytime before 2019 seems to be very slim.

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