Crypto Markets Cheer As Commissioner Hester Peirce Announces That SEC Will Review August 22nd Decision to Reject 9 Bitcoin ETFs

On 23 August 2018, one day after the U.S. SEC rejected (via three disapproval orders) a total of nine Bitcoin ETFs proposals from ProShares, Direxion and GraniteShares, SEC Commissioner Hestor Peirce (the only Commissioner who dissented on the decision last month to reject for the second time the Winklevoss Bitcoin ETF) announced that the SEC has “stayed” (or put on hold) these orders, and that it is going to review these decisions.

She announced the news (around 21:00 via the following tweet:

Yesterday’s staff orders disapproving SRO rules related to a number of bitcoin ETFs are stayed pending Commission review. See, for example: https://t.co/Ky9Z8t1E4q

— Hester Peirce (@HesterPeirce) August 23, 2018

The link in this tweet is to a letter sent by Brent Fields, the SEC’s Secretary, to Eugene Schlanger Counsel for NYSE Group. This letter, which has to do with the rejection of the five Bitcoin ETFs from Direxion, contains the following important paragraph:

“This letter is to notify you that, pursuant to Rule 43 1 of the Commission’s Rules of Practice, 17 CFR 201.431 , the Commission will review the delegated action. In accordance with Rule 43 1 (e), the August 22 order is stayed until the Commission orders otherwise.”

Two other similar letters, with regards to the Bitcoin ETFs from ProShares and GraniteShares, have apparently also been sent out.

Less than an hour after her first tweet, Commissioner Peirce sent this follow-up tweet:

In English: the Commission (Chairman and Commissioners) delegates some tasks to its staff. When the staff acts in such cases, it acts on behalf of the Commission. The Commission may review the staff’s action, as will now happen here.

— Hester Peirce (@HesterPeirce) August 23, 2018

The reply from to this tweet by former SEC Commissioner Michael Piwowar was quite interesting:

It only takes one Commissioner to ask for a review of a staff decision and stay the ruling. After their review is complete, it would take a majority of the Commission to overturn the staff decision.

— Michael Piwowar (@MichaelPiwowar) August 23, 2018

American lawyer Jake Chervinsky agreed with Michael Piwowar, and made the following comment on Twitter:

“Don’t get too excited, folks. Under Rule 431 of the SEC’s Rules of Practice, it only takes a single Commissioner to order a review like this. @HesterPeirce deserves credit & respect for putting up a fight, but there’s no reason to think yesterday’s rejections will be reversed.”

What Chervinsky is referring to is Rule 431 (“Commission consideration of actions made pursuant to delegated authority”), which you can learn more about in the SEC’s “Rules of Practice” document.

As for how a futures-based Bitcoin ETF could cause the BTC price to go up, Twitter user “Nik Bhatia” offered one potential scenario: 

How could a futures-based ETF *possibly* help bitcoin price:

1. Investors buy shares in ETF
2. ETF buys bitcoin futures
3. Broker/dealer sells these bitcoin futures to ETF
4. Broker/dealer is naked short
5. Broker/dealer buys real bitcoin to hedge naked short position
6. 🚀

— Nik Bhatia (@timevalueofbtc) August 23, 2018

The return of hope of a Bitcoin ETF getting approved this year has caused crypto markets to rejoice, with Bitcoin, according to data from CryptoCompare, breaking the $6,500 resistance level, and currently (as of 22:20 UTC) trading at $6,542, up 2.7% in the past 24-hour period.