SEC Delays Spot Bitcoin ETF Decision for All Applicants Including BlackRock, Fidelity

The U.S. Securities and Exchange Commission (SEC) has delayed until October making a decision on all of the spot bitcoin exchange-traded fund (ETF) applications filed by applicants including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets earlier this year, according to agency filings on Thursday.

Already down sharply on the day, bitcoin BTC$90,106.59 fell further on the news, now off 4.1% over the past 24 hours to $26,100.

The SEC began reviewing the latest slate of applications, from both crypto-heavy and traditional finance firms like Wise Origin (Fidelity), BlackRock and Invesco Galaxy, last month. The applicants hope to launch the first spot bitcoin ETF, which advocates have argued would allow for greater retail investment in the bitcoin space while saving investors from the troubles of setting up a wallet or having to buy bitcoin directly.

Today's orders see the SEC holding off on any firm decision, instead extending existing comment periods and allowing for greater public feedback on the applications. The new deadlines for Wise Origin, Galaxy and WisdomTree are Oct. 17, and it's two days later for Valkyrie. Bitwise now has an Oct. 16 deadline.

The regulator has a total of 240 days from when it first begins its review of the applications to make a final decision to approve or deny. SEC staff have traditionally used every possible comment and review period to delay making final decisions until those 240 days have elapsed, making Thursday's agency filings expected.

Earlier this week, the D.C. Circuit Court of Appeals ruled that some of the regulator's arguments in rejecting bitcoin ETF applications seemed "arbitrary and capricious," after Grayscale argued that the SEC didn't have a firm basis to reject its bid to convert the Grayscale Bitcoin Trust into an ETF. Grayscale and CoinDesk share a parent company in Digital Currency Group.

Judge Neomi Rao, writing for the unanimous court, said the SEC's denial of the application was inconsistent with the approval of a pair of bitcoin futures ETFs, and did not explain why it viewed these types of products differently given the underlying bitcoin market had a "99.9% correlation" between spot and futures market prices. Grayscale's argument that its proposed ETF was "materially similar" to the futures ETFs won.

"First, the underlying assets – bitcoin and bitcoin futures – are closely correlated. And second, the surveillance sharing agreements with the CME are identical and should have the same likelihood of detecting fraudulent or manipulative conduct in the market for bitcoin and bitcoin futures," she said.

The SEC has used similar arguments in rejecting other ETF applications as it did in rejecting Grayscale's bid. The appeals court ordered the regulator to review the application once more.

UPDATE (Aug. 31, 2023, 19:42 UTC): Adds Valkyrie's application as one of those delayed.

UPDATE (Aug. 31, 20:11 UTC): Adds Wise Origin delay.

UPDATE (Aug. 31, 20:16 UTC): Adds VanEck delay.

UPDATE (Aug. 31, 20:46 UTC): Updates to say decision for all of the ETF applications are delayed.

UPDATE (Aug. 31, 21:05 UTC): Adds additional detail.