On Wednesday, the U.S. Securities and Exchange Commission (SEC) broke precedent by allowing Teucrium to issue a bitcoin futures exchange-traded fund (ETF), begging the question of whether this sets a pathway for future Bitcoin ETF approvals?
The SEC announced its approval of the ETF application on its website, adding Teucrium to its list of approved bitcoin futures ETF issuers. So, why the different approach by the regulator here?
Unlike previous Bitcoin Futures ETF applications, which have been filed under the Investment Company Act of 1940, Teucrium fund was filed under the Securities Act of 1933 with a 19b-4 form.
Until now, filing under the Investment Company Act seemed to be the SEC’s preferred method, as Chairman Gary Gensler has preached numerous times the advantages it brings to investors, compared to the Securities Act. Last October, the SEC approved the first Bitcoin futures ETFs through this mechanism.
Opening the door to future spot bitcoin ETFs?
According to several analysts, with the SEC approving a Bitcoin futures ETF under the 1933 law, the agency is going against previous arguments it had made regarding the approval of a Bitcoin-based ETF.
“The SEC had previously said that 40 Act funds provide additional investor protections. With the approval of the Teucrium ETF, the SEC just killed their own argument on that front,” said Nate Geraci of the ETF Store.
According to James Seyffart of Bloomberg Intelligence, this could be the first step in enabling a spot Bitcoin ETF:
“Gensler initially approved Bitcoin futures ETFs citing 1940 Act protections stating they’re better than 1933 Act products,” he said. “But this is a 1933 Act futures ETF. This strengthens the case for a spot Bitcoin ETF, which goes through the exact same process,” he argued.
Grayscale challenge
The Teucrium decision also highlights the long-awaited campaign of Grayscale Investments LLC to convert its $28 billion Grayscale Bitcoin Trust into a physically-backed ETF.
After several delays, the SEC now has until July 6 to make a final ruling on the applications. Grayscale CEO Michael Sonnenshein said that if the applications got rejected, “all options are on the table,” including a potential lawsuit.
Last week, the SEC rejected Ark 21Shares’ Bitcoin Spot ETF filing. To date, the SEC has rejected all spot bitcoin ETF applications, stating its concerns surrounding market manipulation and lack of a surveillance-sharing agreement.
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