SEC Rejects ETF Applications by ProShares, Direxion, and GraniteShares

The US SEC has rejected the highly anticipated ETFs proposed by ProShares, Direxion, and GraniteShares.


The U.S SEC has revealed that it has rejected a total of nine Bitcoin ETF applications from three different applicants. This information was contained in three separate orders published by the SEC yesterday, August 22 ahead of its August 23 anticipated date.

Summary of ETF’s rejected by applicant and hosting exchange (08-22-2018):

  • ProShares – NYSE Arca – 2 ETF’s – Rejected
  • Direxion – NYSE Arca – 5 ETF’s –Rejected
  • GraniteShares – CBOE – 2 ETF’s –Rejected


The SEC’s rejections were all based on the fact that the spot market remains unregulated, illiquid and subject to manipulation. The SEC further added that the derivatives markets (futures) are still insignificant to offer stability in the markets.

SEC Rejects ETF Applications by ProShares, Direxion, and GraniteSharesSEC rejects 2 ProShares ETF, 7 others

The SEC had scheduled to make the decision today, August 23 but instead disapproved them a day ahead of the deadline.

ProShares, in partnership with the NYSE ETF exchange ‘NYSE Arca’ submitted a pair of Bitcoin ETFs which were rejected by the commission.

The SEC has also rejected seven other proposed ETFs alongside the ProShares pair. Five of them were proposed by Direxion, which sought to be listed on NYSE Arca, and two from GraniteShares, for listing on CBOE.

The Direxion Bitcoin ETF application was already delayed once before as previously reported.

In its statement following the disapproval of all nine ETFs, SEC stated that:

[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange 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 the Exchange Act Section 6(b)(5), in particular, the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.

The commission also reiterated its concerns over the inadequate policies put in place to combat price manipulation in an insufficiently sized BTC derivatives market. Talking about the two ProShares rejected ETF, the commission stated that:

Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.

SEC concerned Bitcoin spot market is still unregulated

ProShares submitted the Bitcoin ETF registration form back in March. The commission noted then that ProShares do not intend to hold Bitcoin Futures Contracts through expiration, but instead intend to either close or ‘roll’ their respective positions.

SEC had dimmed this as a potential risk for the two Bitcoin ETFs proposed, in addition to the extremely volatile and low liquidity for both Bitcoin spot and derivatives markets.

Talking about the three applications, SEC stated that:

[The agency] emphasizes that its disapproval does not rest on an evaluation of whether Bitcoin or blockchain technology more generally, has utility or value as an innovation or an investment.

This latest disapproval by the commission shows that the SEC is still concerned about the lack of regulation in the market. The agency discussed this during its initial rejection of a high-profile Bitcoin ETF application from the Winklevoss twins in March 2017.

It stated that:

When the spot market is unregulated –– there must be significant, regulated derivatives markets related to the underlying asset with which the Exchange can enter into a surveillance-sharing agreement.

The Winklevoss twins applied for another ETF which was rejected by SEC last month. The twins claimed that the cryptocurrency markets are now uniquely resistant to price manipulation.

However, SEC doesn’t agree with that statement, thus the reason why they rejected the ETFs.

VanEck ETF decision postponed by SEC

Earlier this month, the commission delayed its decision over yet another Bitcoin ETF application filed by investment firm VanEck and financial services company SolidX, for trading on CBOE.

This ETF was a unique one as it proposed physically-backed model instead of a Bitcoin futures-based fund. The Bitcoin price hasn’t reacted much to the news as it is still trading above the $6,400 mark.

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