When Will The SEC Say Yes To A Bitcoin ETF?

Some of my smartest lawyer friends insist that the SEC isn’t anti-crypto. They tell me that its hardline stance toward bitcoin-based ETFs stems from a mandate to protect investors.

Put yourself in their shoes, they say…

You are witnessing a crypto phenomenon, which may be intriguing but not personally compelling. You’re not a crypto believer. As a government worker, you have no sympathy for government haters. Nor is your understanding of bitcoin particularly deep.

You’re not paid to give the benefit of the doubt to new investment classes. But it’s your job to follow crypto, so you’re aware of the hacks, the sometimes breathtaking volatility, the quilt of registered and unregistered cryptocurrency exchanges, the scammy ICOs, and the accusations of price manipulation.

And you don’t feel any urgency to approve something before you’re 110% certain it’s ready for prime time.

Is it any wonder that the SEC has rejected all ETF proposals to date?

Nope. Thanks to my lawyer friends, I see the light.

But my patience is running out. And as I’ve told these friends, if the SEC rejects the VanEck-SolidX bitcoin ETF proposal, I will be putting the SEC on my official naughty list. [As most I recently noted on Nov. 12]

After I tell you why I think you’ll fully agree with me.

Three Flavors

But first, a bit of background is in order here…

Bitcoin ETF proposals have come before the SEC in three basic flavors:

  1. ETFs that get their price from crypto exchanges
  2. ETFs that get their price from futures contracts
  3. ETFs that get their price from over-the-counter (OTC) desks.

The first ETF proposals were based on following prices on crypto exchanges. The SEC rejected them, saying the exchanges were susceptible to market manipulation.

Companies then turned to futures contracts. That seemed like a good idea. They were run by the folks at the highly reputable CBOE (Chicago Board Options Exchange) in partnership with the Gemini exchange and CME (Chicago Mercantile Exchange) in partnership with Crypto Facilities. They fully complied with the high standards of the CFTC (Commodity Futures Trading Commission), which is sensitive to the concerns of the big and powerful institutional investors who trade billions of dollars on futures daily.

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