Winklevoss ETF: SEC Commissioner Publicly Disagrees With Second Rejection of the Fund

Hester Peirce thinks that the changes in the Bitcoin exchange-traded application satisfy legal requirements.

In a rare move of public dissent in the US Securities and Exchange Commission (SEC), one of the Commissioners, Hester Peirce, has publicly revealed her objection to the regulator’s second disapproval of the Winklevoss brothers’ Bitcoin-related exchange-traded fund (ETF). Pierce published her opinion on the SEC website on Friday, saying that the Commission ruling is against consumer securities and innovation as the Winklevoss’ second ETF proposal fulfills federal legal provisions.

“I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market […] More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs,” Peirce said.

On Thursday, SEC dismissed again the ETF proposal from the famous billionaire twins Cameron and Tyler Winklevoss by three-to-one, with Pierce voting against the decision. The fund, aiming at attracting institutional investors, was supposed to be traded on Bats BZX Exchange, part of the largest US options exchange CBOE Global Markets.

The Commissioner explained in detail why she does not believe in the manipulation concerns which SEC used to reject the Winklevoss’ ETF. Pierce thinks that SEC wrongly focused on the spot market for Bitcoin (BTC), rather than on the ability of BZX to oversee trading and to deter manipulation in the exchange-traded product’s shares listed and traded on CBOE trading platform. Thus, the US regulator did not give adequate weight to the important function of exchanges, which was the most important issue in the application, according to Pierce, as they are self-regulatory organizations (“SROs”) under the federal law.

Accusing the SEC of “merit regulation”, Pierce said that she would discuss these problems with her colleagues.

“The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other.

The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list,” the Commissioner explained.