SEC Rejects Winklevoss Bitcoin ETF, Sending Price Tumbling

The news prompted a selloff in bitcoin, with the price falling from nearly $1,300 to $1,100, probably partially because the price rose in anticipation of a decision. (Last week, the price surpassed that of gold.) The total value of all outstanding bitcoins fell to $16.5 billion.

In its statement, the SEC stated, "the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest."

The agency noted that, to be approved, an exchange offering a bitcoin ETF would need "surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated."

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Nor does the end of the Winklevoss proposal end the prospects for a bitcoin ETF. Two more similar filings are working their way through the SEC. However, Phil Bak, CEO of ETF issuer ACSI Funds, says it is "overwhelmingly likely" that the SEC will also approve a filing currently under consideration by SolidX that has a deadline of March 30. The other filing, which does not have a deadline, is by Grayscale Investments, which already operates the Bitcoin Investment Trust (GBTC), a private placement (currently suspended pending the ETF filing) for wealthy investors that trades on the open market after a one-year lockup period.