The possibility of the United States Securities and Exchange Commission (SEC) chairman Gary Gensler rejecting spot Bitcoin exchange-traded funds (ETFs) in a single, unexpected move has been raised by analysts at Bloomberg. In a tweet on October 31, Dave Nadig, an ETF commentator, speculated whether Gensler might be accumulating spot Bitcoin ETF applications for the purpose of denying them all at once in what he called a “semi-comedic rug-pull.”
James Seyffart and Eric Balchunas, senior Bloomberg ETF analysts, responded to Nadig’s comment. Seyffart admitted that the idea had lingered in the back of his mind for several weeks or months, adding that it would be “absolutely epic” if Gensler actually executed such a move. Balchunas described the potential rug pull as “amazingly sadistic” and predicted that it would likely lead to a wave of lawsuits.
Although both analysts deemed the scenario unlikely, Balchunas acknowledged that a last-minute denial was not entirely out of the question. As a result, they are cautious about raising the odds of approval above 90%.
Gensler’s stance on spot Bitcoin ETFs has recently gained attention due to a video from 2019 in which he described the SEC’s position on spot ETF products as “inconsistent.” The SEC has a long history of rejecting spot Bitcoin ETF applications, dating back to 2017. Since becoming the head of the SEC in 2021, Gensler has continued this trend by delaying and pushing back recent spot Bitcoin ETF applications, citing concerns about investor protections.
In June 2022, the SEC was sued by crypto asset manager Grayscale for rejecting its bid to convert its existing Bitcoin trust into a spot ETF. A court ruling deemed the SEC’s rejection of the application as “arbitrary and capricious.” The SEC chose not to appeal the decision.
So far, the SEC has only approved ETF applications for Bitcoin and Ether futures products, stating that spot products lack sufficient safeguards to protect investors from market manipulation.
The potential rejection of spot Bitcoin ETFs would undoubtedly have significant implications for the crypto industry. With the growing interest in cryptocurrency investments, the approval of spot Bitcoin ETFs would provide retail investors with easier access to the digital asset and potentially drive further adoption.
While analysts acknowledge the possibility of a rug pull, they also emphasize the unpredictability of Gensler’s decision. The crypto community will closely watch Gensler’s next moves and wait eagerly to see if spot Bitcoin ETFs will receive the long-awaited green light.
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