This story previously ran in Financial Advisor IQ's sister publication, Ignites.
VanEck has renewed its plans for a Bitcoin ETF amid a brewing legal battle over the Securities and Exchange Commission’s refusal to allow such products to come to market.
CBOE Global Markets asked the SEC for permission to change to its listing rules to allow VanEck to list and trade shares of its proposed Bitcoin Trust, according to a June 24 application posted on the CBOE’s website. The filing was first reported Thursday by CoinDesk.
VanEck’s original exchange listing application, known as a 19b-4 filing, was rejected by the SEC in November 2021 on the grounds that there was not a regulated market of significant size for Bitcoin in which the CBOE, the ETF’s exchange, could enter into a surveillance sharing agreement.
But now, VanEck argues that the Bitcoin futures market is large enough that spot Bitcoin products could rely on that market.
VanEck believes that the SEC has validated the Bitcoin futures market by approving Bitcoin futures-based ETFs, including ones by Teucrium and others that are structured as trusts like spot Bitcoin ETFs rather than products regulated by the Investment Company Act of 1940.
“After issuing the Bitcoin futures approvals which conclude the CME Bitcoin futures market is a regulated market of significant size as it relates to Bitcoin futures, the only consistent outcome would be approving spot Bitcoin ETPs on the basis that the Bitcoin futures market is also a regulated market of significant size as it relates to the Bitcoin spot market,” the filing notes.
It is the same argument made by other Bitcoin ETF would-be sponsors, including Grayscale, whose plans to convert its over-the-counter Grayscale Bitcoin Trust into an ETF was rejected by the commission last week. Grayscale quickly countered with a petition for the DC Circuit Court of Appeals to review the SEC’s decision.
"The SEC is failing to apply consistent treatment to Bitcoin investment vehicles," Grayscale said in a statement last week. "If regulators are comfortable with ETFs that hold derivatives of a given asset, they should logically be comfortable with ETFs that hold that same asset."
VanEck believes that research conducted by the firm, its industry peers and others have answered many of the SEC’s issues with spot Bitcoin ETFs, said Gabor Gurbacs, the company’s director of digital assets strategy, during a Friday forum hosted by CoinDesk.
Two of the concerns – the lack of pricing vendors and robust custody – “are resolved” with the growth of Bitcoin indexes and because established banks are getting into crypto custody. The third concern, surveillance sharing agreements with the crypto exchanges, “is being contested by regulators as sort of a roadblock [to approval],” Gurbacs said. But while the requirement is a novel one not required of ETFs that track spot commodities like gold and palladium, he said the crypto exchanges and ETF listing venues like NYSE Arca or CBOE will come to an agreement.
“We believe we’ve met [the SEC’s] standards,” he said, noting that he’s optimistic the SEC will eventually approve a spot Bitcoin ETF.
Though VanEck refiled before Grayscale’s proposed ETF conversion was rejected, the firm may have wanted to revitalize its application in the event that Grayscale wins its case, wrote Bloomberg Intelligence’s Eric Balchunas in a tweet Friday.
The firm already manages a futures-based Bitcoin product, the $17 million VanEck Bitcoin Strategy ETF, which launched in November. VanEck’s 65 ETFs represented $58.3 billion as of June 30, according to FactSet Research data.