The Securities and Exchange Commission (SEC) recently denied an application to create an exchange-traded fund (ETF) tied to the price of Bitcoin. In its decision, the agency cited the lack of regulatory oversight capabilities for the cryptocurrency.
Tyler and Cameron Winklevoss, who are long-established supporters of Bitcoin, were behind the ETF at issue. Bats BZX Exchange filed a proposed rule change to list and trade shares of the Winklevoss Bitcoin Trust. The ETF would have allowed the public to invest in Bitcoin by purchasing shares in the fund, which would trade on the exchange.
After soliciting public comments on the application, the SEC denied the proposed rule change, concluding that it “does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, 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.” In further support of its decision, the SEC stated:
The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.
In its decision, the SEC further highlighted that Bitcoin was “still in the relatively early stages of its development and that, over time, regulated Bitcoin-related markets of significant size may develop.” Accordingly, the agency may reconsider its position on Bitcoin-related ETFs should the market gain further legitimacy.
Impact on Crypto-Currencies
While Bitcoin values did initially drop 15 percent, the impact of the SEC ruling was not as significant as many had predicted. In fact, the value of other crypto-currencies, particularly Ether, have skyrocketed. Bitcoin has also already bounced back. There is no clear explanation for the market behavior. As Fortune explained:
Some commentators have suggested the recent boom comes from new digital currency converts who learned about the assets as a result of the publicity surrounding the ETF decision. Others say the recent prices simply reflect the fact that digital currencies are a far more sturdy asset than they were two years ago, and their values can no longer be derailed by a bit of negative news.
While a favorable SEC ruling would have given Bitcoin greater legitimacy, the agency’s refusal did not spell doom for the emerging crypto-currency. It did, however, confirm that the growth of the industry will continue to be unregulated, which will most likely lead to exponential growth, but also carry the twin risks of an unregulated market and how the market will respond once regulation is imposed.
Dissolving Your Business: Essential Legal Steps to Protect Your Interests
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
The Role of Corporate Restructuring in Mergers & Acquisitions
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
