SEC Rejects Proposal To List Bitcoin-Based ETP On Regulated Exchange

By a three-to-one vote, the SEC rejected a second application by the Bats BZX Exchange ("BZX") (now owned by Cboe Global Markets) to list a bitcoin-backed exchange-traded product ("ETP"). The proposal, which was previously rejected by the SEC Division of Trading and Markets, would have permitted the listing and trading of shares of the "Winklevoss Bitcoin Trust." The ETP would have (i) held only bitcoins as an asset and (ii) tracked the price of bitcoin on the Gemini Exchange, a cryptocurrency exchange founded by Cameron and Tyler Winklevoss. To date, the SEC has not approved a cryptocurrency-backed ETP.

Exchange Act Section 6(b)(5) requires that the rules of a national securities exchange be designed to (i) "prevent fraudulent and manipulative acts and practices" and (ii) "protect investors and the public interest." In its Order, the SEC asserted that the price of bitcoin can be (and has been) manipulated through activity on bitcoin trading venues. The SEC