The Securities and Exchange Commission has asked for additional comments on issuer WisdomTree’s proposal to list a spot bitcoin exchange-traded fund (ETF).
WisdomTree refiled for a spot-bitcoin product in February of this year after receiving a rejection in December 2021. At the time, the SEC cited a lack of surveillance sharing agreements and the subsequent inability to curb fraudulent or manipulative practices in the spot market. The December rejection was the second in a wave of denials from the US securities regulator.
Another attempt from WisdomTree hit the Federal Register in February, and the SEC subsequently punted on the first deadline in March. That decision designated an additional 45 days to May 15. At the time, the Commission said it required additional time to consider the proposed rule change and any comments received.
However, today's order institutes proceedings to determine whether to approve or disapprove the rule change filed on behalf of WisdomTree by exchange CboeBZX.
"The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the 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,'" said the order.
Commenters are asked to address whether WisdomTree's proposed product would be susceptible to manipulation and if the Bitcoin markets have grown to a place where they don't present a significant manipulation risk. Commenters will have 21 days to submit data and arguments, and an additional two weeks to submit rebuttals to those comments.
A spot product has yet to reach the market in the US, though regulators have approved a number of futures-based bitcoin ETFs. In the SEC’s rejection orders, it has maintained that the spot market has yet to enter into sufficient surveillance sharing agreements to mitigate fraud.
Some, like spot-ETF applicant Grayscale, have argued that this constitutes unequal treatment since futures are priced related to the underlying market.