Arthur Bard

Will the SEC Approve Any Of The Recent Bitcoin Spot ETF Applications? People often ask for my opinion on whether the SEC will approve any of the recent spate of bitcoin spot ETF applications, which is an interesting and important question. My take is that the current SEC will NOT approve a bitcoin spot ETF application for a range of compelling reasons, which the independent and objective experts at @BetterMarkets present brilliantly (and a lot better than I ever could) in their August 8, 2023 SEC Comment Letters in response to multiple proposed rule changes filed by national securities exchanges to list and trade shares in spot bitcoin-based exchange traded products (see links and excerpt below). However, I also believe that the crypto-regulatory tides could shift exponentially after Election Day. Crypto and Partisanship Issues surrounding crypto regulation have unfortunately become increasingly partisan at the SEC. This is surprising because when I first began writing about crypto in 2017, crypto was not at all a partisan issue. For instance, back then, President Donald Trump, Secretary Hillary Clinton and Congresswoman Maxine Waters all shared the same view about crypto i.e. that crypto was a dangerous and horrific plague. See, e.g. corpgov.law.harvard.edu/2019… Moreover, the SEC’s crypto-crackdown began under Republican-appointed SEC Chair Jay Clayton. Chair Clayton served as a fierce and relentless crypto critic and boasts a hefty multi-year track record of anti-crypto speeches and Congressional testimony, while also spearheading a broad range of groundbreaking crypto-related enforcement actions and aggressive/comprehensive SEC crypto-related regulatory pronouncements. linkedin.com/pulse/sec-tripl… If a Republican is Elected U.S. President in 2024 Given the partisan divide that has evolved regarding crypto, especially at the SEC, my take is that should a Republican get elected U.S. President in 2024, the slate of Republicans appointed to the SEC will likely: 1) Decrease significantly the SEC’s crypto-enforcement efforts, probably filing mostly fraud cases, shifting efforts away from charging pure registration violations (such as the failure of a crypto-trading platform to register as an exchange, broker-dealer and clearing firm); and 2) Become far more receptive to approving a bitcoin spot ETF and far more likely to take other significant crypto-friendly regulatory actions. Hester Pierce as SEC Chair By way of background, the SEC is an independent federal agency, established pursuant to the Securities Exchange Act of 1934, headed by a five-member Commission. The Commissioners are appointed by the President and confirmed by the Senate. The President designates one of the Commissioners as the Chair. To ensure that the Commission remains non-partisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as chair, the SEC's top executive. When any President is elected, the current SEC Chair typically resigns and the new SEC Chair position is rarely confirmed and filled until at least 3-4 months after Inauguration Day. Hence, should a Republican get elected President, Chair Gensler would likely resign and the senior Republican appointed SEC Commissioner (in this case famed "crypto-mom" @HesterPeirce) would possibly become acting Chair. In addition, given that there would now be an equal number of Republicans and Democrats on the Commission, any votes by the Commission, especially relating to crypto-recommendations from the staff, could easily split at 2-2, because there would be at least one vacancy on the Commission. If @HesterPeirce becomes acting Chair of the SEC, given her lengthy track record of dissent and opposition to most crypto-related SEC actions, the world should expect that most U.S. SEC crypto-related enforcement and most crypto-related SEC disruption would grind to a screeching halt. linkedin.com/posts/john-reed… That's my take, FWIW. Read a compelling and powerful excerpt from Better Market's announcement of their Comment Letters below and find links to both of Better Market’s full Comment Letters afterwards. “The spot bitcoin markets (1) have a history of artificially inflated trading volumes due to rampant manipulation and wash trading; (2) are highly concentrated; and (3) rely on a select group of individuals and entities to maintain bitcoin’s network. These are features of the bitcoin network that make a proposed spot bitcoin-based ETP extremely vulnerable to manipulation by bad actors, posing unnecessary risks to investors and the public interest. The proposed rule changes offer little to neutralize these threats.  Their reliance on the surveillance of other markets to detect and address manipulation is wholly inadequate.  For example, the CME bitcoin futures market is not a regulated market of significant size, and the surveillance-sharing agreements with Coinbase would add little or no value in detecting and deterring manipulation of any proposed spot bitcoin-based ETP. Products that pose such clear threats to investors and fail to comply with the core requirements of the law must be rejected.” bettermarkets.org/wp-content… bettermarkets.org/wp-content…