SEC rejects Ark21Shares spot Bitcoin ETF for the second time

• SEC has denied the Ark Investment and 21 Shares joint spot Bitcoin ETF application.
• The agency says proposal failed to meet requirements as per securities laws, citing fraud and manipulative practices once again.
• It’s the second time the SEC has rejected an ETF proposal by the two firms, after denying the first one in April last year.

The US Securities and Exchange Commission (SEC) has disapproved a proposal seeking to list a spot Bitcoin exchange-traded fund (ETF) for the US market.

In a document published on Thursday, the US securities market watchdog said it had rejected the application by Cathie Wood’s Ark Investment and Swiss cryptocurrency investment firm 21Shares. 

The Ark 21Shares spot Bitcoin ETF had been proposed for listing on the Cboe BZX Exchange.

SEC denies Ark 21 Shares Bitcoin ETF again

The Commission’s order disapproving the two companies’ ETF application noted that BZX did not “demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5).” 

Specifically, the exchange failed to demonstrate that it could prevent fraud and other manipulative practices as well as protect those looking to invest in the product.

“The Commission further concludes that BZX has not established that it has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot bitcoin, the underlying bitcoin assets that would be held by the Trust,” reads part of the SEC’s reasoning for disapproval.

This is the second time the agency has rejected a spot Bitcoin ETF proposal by Ark Investment Management and 21Shares. The SEC dismissed a similar application in April, a move that prompted the two firms to submit a fresh one last May.

The SEC has also disapproved of multiple other spot bitcoin ETF applications, including one by Grayscale Investment, which sought to convert the Grayscale Bitcoin Trust (GBTC) to a BTC spot ETF. The asset manager filed a lawsuit against the agency following the agency’s move in June 2022.