The U.S. Securities and Exchange Commission (SEC) has announced a postponement in its decision-making process regarding all spot Bitcoin exchange-traded fund (ETF) applications. This decision affects applications submitted by various entities, including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets earlier this year. The SEC disclosed this delay through agency filings on Thursday, which had an immediate impact on the Bitcoin (BTC) market, pushing its price down by 4.1% over the past 24 hours, bringing it to $26,100.
The SEC initiated the review of these applications last month, involving a mix of both cryptocurrency-focused and traditional financial firms such as Wise Origin (Fidelity), BlackRock, and Invesco Galaxy. The applicants aspire to introduce the first-ever spot Bitcoin ETF. Advocates argue that this development would enhance retail participation in the Bitcoin sector while sparing investors from the complexities associated with managing wallets or purchasing Bitcoin directly.
In today’s announcement, the SEC has opted to delay a definitive decision, opting instead to extend the existing comment periods and encourage more public input on these applications. The new deadlines for Wise Origin, Galaxy, and WisdomTree are set for October 17, with Valkyrie’s deadline falling two days later on October 19. Bitwise has an October 16 deadline. It’s important to note that the SEC has a maximum of 240 days from the commencement of its application review to issue a final approval or denial. Historically, SEC staff have utilized every available comment and review period to delay making final determinations until this 240-day period elapses, and this pattern was in line with Thursday’s agency filings.
Earlier this week, the D.C. Circuit Court of Appeals rendered a verdict regarding the SEC’s rejection of Bitcoin ETF applications. The court found that some of the regulator’s arguments appeared “arbitrary and capricious,” particularly in response to Grayscale’s petition to transform the Grayscale Bitcoin Trust into an ETF. Notably, Grayscale and CoinDesk share a parent company in Digital Currency Group. In her statement on behalf of the unanimous court, Judge Neomi Rao pointed out that the SEC’s denial of the application contradicted the approval of two Bitcoin futures ETFs. The SEC failed to clarify why it perceived these product types differently when the underlying Bitcoin market exhibited a “99.9% correlation” between spot and futures market prices. Consequently, Grayscale’s argument that its proposed ETF closely resembled the futures ETFs was validated.
The SEC has employed analogous arguments in rejecting other ETF applications, mirroring its approach in dismissing Grayscale’s bid. The appeals court has mandated the regulator to reevaluate the application once more.
