Spot Bitcoin ETF Launch Will Solidify Crypto As A Distinct Asset Class

The US Securities and Exchange Commission (SEC) has repeatedly rejected every application for a spot Bitcoin
BTC
Exchange Traded Fund (ETF) with direct exposure to Bitcoin as the underlying asset. The SEC has consistently cited the safeguarding of investors against potential crypto market manipulations and concerns about Bitcoin market liquidity as the primary reasons for rejections. According to previous denial rulings on spot ETF applications by the SEC, a Bitcoin trust sponsor must form a “surveillance-sharing agreement” with a sizable and regulated market of considerable scale. This SEC position relegates the ETF applicant to either execute such an agreement with a spot Bitcoin exchange or provide in-depth details about the surveillance arrangement.

The SEC, on the other hand, has continued to approve both long and short exposure Bitcoin futures ETFs. These products are tied to the price of the Chicago Mercantile Exchange (CME) Bitcoin futures product and its associated index. All commodity futures contracts, including Bitcoin futures contracts, fall under the regulatory purview of the Commodity Futures Trading Commission (CFTC) and must trade on CFTC-regulated exchanges. The Bitcoin futures ETFs rely on the market surveillance arrangement with the CME, the primary platform for Bitcoin futures trading. CME is a CFTC-registered and regulated Designated Contract Market (DCM) with robust regulatory oversight to prevent market manipulation.