Bitwise Revamps Bitcoin Spot ETF Application to Challenge SEC

One of the first businesses to apply for a Bitcoin spot ETF in the US, Bitwise, has adopted a novel strategy to convince authorities to approve its request. The business amended its application on Monday, putting out new justifications that it claims refute the justifications for the Securities and Exchange Commission’s (SEC) repeated rejection of Bitcoin spot ETFs.

Challenging the SEC’s Argument

The CME Bitcoin futures market, according to the SEC, isn’t big enough or connected enough to Bitcoin’s spot market to prevent potential market manipulation. This is the main justification for why the SEC has opposed allowing Bitcoin spot ETFs. Bitwise disputes this idea, claiming that the futures market has a significant impact on Bitcoin’s price.

We strive to… illustrate that every well-designed academic research supports the notion that the CME is significant,’ as Bitwise’s Chief Investment Officer stated on Twitter.

According to Bitwise, the CME Bitcoin futures market is a “regulated market of significant size” that is suited for efficient market monitoring since it is a key factor in the determination of Bitcoin’s price.

The Importance of Research

Past study serves as support for Bitwise’s claim. A Bitwise analysis referenced by Hougan indicates that the relative size of the futures market is substantially bigger than the trading activity in Bitcoin’s spot market, which may be mostly artificial.

In a research from 2021, Bitwise discovered that CME futures had a substantial role in the process of determining the price of Bitcoin, accounting for 52.97% to 68.03% of it. The SEC said that this did not support the need for the CME to prevent manipulation, but Bitwise believes the solution is obvious.

In its filing, Bitwise stated: “The Sponsor’s answer can only be that 50% is the uniform academic standard across every price discovery paper the Sponsor has reviewed, as well as all academic papers the Commission has referenced.”

The Ongoing Battle for Approval

After losing a battle with Grayscale in August, the SEC amended Bitwise’s application. While approving futures ETFs, Grayscale claimed that the SEC unjustly rejected their proposal for a Bitcoin spot ETF. Strong arguments outlining the link between CME futures and spot pricing would be essential should the SEC decide to appeal the court’s decision.

“In short, we return to the status quo,” Hougan said in his conclusion. Unfortunately, until today, no substantively fresh arguments or studies have been presented in prior files that directly address this issue.

The fight to build regulated investment products in the United States is still being fought inside the bitcoin sector, as seen by Bitwise’s resolve to contest the SEC’s position.