SEC Approves 11 Exchange-Traded Products Holding Bitcoin In Landmark Order

On January 10, 2024, the U.S. Securities and Exchange Commission (“SEC”) approved 11 exchange-traded products (“ETPs”) holding bitcoin, known as spot bitcoin ETPs, in a landmark decision for crypto advocates.    

ETPs are investment instruments that track underlying securities, commodities, or other financial products, and trade on exchanges just like stocks.  ETP share prices are derived from the underlying investments they track.  Spot bitcoin ETPs track the price of bitcoin by holding bitcoin as their underlying asset.   

As Law360 explained, the SEC’s order comes after years of rejecting applications for spot price ETPs from various issuers, “primarily citing concerns that the market for spot bitcoin was not mature enough to thwart market manipulation.”  The SEC’s change of heart followed the D.C. Circuit’s 2023 decision that the SEC failed to adequately explain its reasoning in disapproving the listing and trading of a proposed ETP by Grayscale.  Grayscale argued that the SEC acted arbitrarily when it rejected spot bitcoin ETPs but allowed other products holding bitcoin futures to list, which are priced on the same underlying market.  SEC Chair Gary Gensler explained that based on the Grayscale decision and circumstances “discussed more fully in the [SEC’s] approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares.” 

Gensler was careful to note, however, that the SEC’s “action is cabined to ETPs holding one non-security commodity, bitcoin[,]” and that the SEC ‘s decision “did not approve or endorse bitcoin[.]”