The SEC has again rejected a proposal to list the ARK 21 Shares Bitcoin ETF on stock exchange Cboe BZX, having rejected a similar proposal in April, according to a Jan. 26 statement from the SEC.
If approved, the proposed exchange-traded fund ETF would be jointly managed by Cathie Wood's Ark Investment Management and 21Shares. The purpose of the proposed fund is to allow investors to gain exposure to the price of Bitcoin within the confines of a regulated stock market.
The Cboe BZX exchange originally requested June 2021 to list the ETF. After its first application was rejected in 2022, it reapplied and presented new legal arguments in an attempt to get the fund approved.
In a second filing in May, the Cboe BZX stock exchange argued that it has a "comprehensive oversight sharing agreement with a large regulated market" that prevents price manipulation. The exchange argues that the ARK 21Shares Bitcoin ETF should therefore be allowed to list. According to the application, the surveillance sharing agreement was with the Chicago Mercantile Exchange (CME), which trades bitcoin futures contracts. The application also argues that most currency and commodity spot markets are unregulated, but that generally does not mean that applications will be rejected for that reason alone.
The SEC dismissed those arguments in its response. It said the oversight sharing agreement between the Cboe BZX Equities Exchange and the CME does not apply to spot bitcoin because only bitcoin futures contracts trade on the CME.
The SEC also claimed that surveillance sharing agreements are not always required, but if such agreements do not exist, then the exchange must “determine that other means of preventing fraudulent and manipulative acts and practices are sufficient.” It stated that the exchange did not Arguing this, the ETF is therefore not allowed to list.
To date, the SEC has not approved any spot bitcoin ETFs to list on exchanges. Grayscale Investment Trust is seeking to convert its bitcoin trust into a spot bitcoin ETF and has sued the SEC to reject its proposal. Oral arguments in the Grayscale case are scheduled for March.
