SEC Rejects WisdomTree's Application For Bitcoin Spot ETF: Here's Why

WisdomTree's application lacks valid measures to protect investors, says SEC

New York-based asset manager WisdomTree Investments' application for approval of a Bitcoin spot exchange-traded fund (ETF) has been rejected by the Securities and Exchange Commission (SEC).

The financial regulator has approved multiple Bitcoin futures ETFs but is yet to give sanction to a Bitcoin spot ETF.

The SEC rejected WisdomTree's application due to a lack of investor protection from the volatility and manipulation of the Bitcoin (BTC) market. The application to list the spot ETF on Cboe BZX Exchange was filed in January and was delayed multiple times by the SEC.

"The Commission concludes that BZX 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 requirements of Exchange Act Section 6(b)(5), which requires, in relevant part, 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 SEC.

However, this was not a surprise as the regulator had also rejected a similar application from Grayscale Investments, which wanted to convert its flagship product GBTC into a Bitcoin spot ETF.

Following this, Grayscale's senior legal strategist Donald B. Verrilli Jr. filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit on behalf of the digital asset manager.

Will Peck, the head of WisdomTree, previously said the SEC's requirement to curb market manipulation was the "hardest nut to crack, where there's been the biggest slowdown."

"The reasons that [the SEC has] given have really been around potential for market manipulation — that Bitcoin trading does not happen on regulated venues [...] There's been some questions in the past of custody, the ability of qualified custodians, whether banks or otherwise to be able to custody crypto assets on behalf of a registered firm like this," Peck said in September.