Bloomberg Intelligence research analyst James Seyffart expressed his views on the scenarios that could unfold for three of the many companies that applied for a spot Bitcoin ETF before the SEC’s approval deadline.
Seyffart aims to anticipate events due to the existing probability of the Securities and Exchange Commission (SEC) issuing delay orders. However, he clarified that the delays would not alter his perspective or the 90% likelihood of the SEC approving a spot Bitcoin ETF before the end of January 2024.
Okay, we’re nearing in on deadline dates for 3 spot #Bitcoin ETF applications. I want to get ahead of it because there’s a pretty good chance we’ll see delay orders from the SEC. Delays WOULD NOT change anything about our views & 90% odds for 19b-4 approval by Jan 10, 2024 pic.twitter.com/LE7sOlHAHM
— James Seyffart (@JSeyff) November 14, 2023
The SEC should approve a Bitcoin Spot ETF in the next two months
According to the analyst, the SEC would need to approve Rule 19b-4 before January 10, 2024, enabling the listing of a spot Bitcoin ETF on American exchanges for the first time in U.S. history.
To date, the SEC has hesitated to approve a spot Bitcoin ETF, either postponing or rejecting applications at its discretion. However, this time, the scenario is very different, not only due to the growing interest of institutions in Bitcoin but also because of the stance of judges and lawmakers regarding the SEC’s lack of valid arguments for rejecting applications.
As reported by ZyCrypto, the SEC had no intention of appealing the recent court ruling favouring Grayscale Investments, which sued the SEC for unjustly denying the conversion of its GBTC into a spot ETF without valid arguments. The DC Circuit Court of Appeals ruled in August that the SEC’s denial of Grayscale’s request was invalid and needed to be reconsidered.
Keeping this in mind, Seyffart indicated that it is highly likely the SEC will issue delay orders for the three new Bitcoin ETF applications expiring soon, as delays are common when the SEC requires more time to review applications.
How is an ETF application carried out?
Ryan Rasmussen, a researcher at Bitwise Asset Management, explained that to launch a bitcoin exchange-traded fund (ETF), one must first understand that two laws govern the process.
To understand the efforts to launch a spot bitcoin ETF, one must first understand how ETFs get to market.
Most ETFs are registered under the Investment Company Act of 1940. These “1940 Act” ETFs have a fairly simple pathway to approval: Issuers file an application with the SEC,… pic.twitter.com/D6OvmTNjRZ
— Ryan Rasmussen (@RasterlyRock) November 15, 2023
Rasmussen emphasized that most ETFs are registered under the Investment Company Act of 1940. Under this law, the application is automatically approved after 75 days unless the Securities and Exchange Commission (SEC) blocks it. However, bitcoin ETFs are registered under the Securities Act of 1933. Under this law, the SEC must affirmatively approve the application, which can take up to 240 days for the regulator.
In practical terms, the party applying for the ETF must submit details of the proposed fund to the SEC. Then, the exchange where it will be traded submits a “Form 19b-4” so that the ETF can be listed there. Subsequently, the SEC has 240 days to approve or reject the application from its publication.
Rasmussen highlighted that historically, the SEC has taken almost the full 240 days to review Bitcoin Spot ETF applications, although it may be different this time. Who knows if regulatory winds will finally blow in favour of the crypto industry this time?
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