In its letter, the SEC wrote that “the Commission concludes that [the fund] has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with … the requirement 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.’”
The decision was widely expected as SEC Chair Gary Gensler has indicated his preference for a bitcoin futures ETF over an ETF that holds bitcoin multiple times in the past.
Two bitcoin futures ETFs, the ProShares Bitcoin Strategy ETF (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF), began trading last month, leading to a significant rally in the price of bitcoin. VanEck has its own bitcoin futures ETF that has received permission from the SEC to launch, but it has not begun trading yet.
The price of bitcoin briefly dipped less than 1% following the release of the SEC’s decision, but quickly recovered. Bitcoin was trading down about 3.1% over the past 24 hours to $63,182.